Part II: Turnaround and Sale of Elvin Safety

Situation

Elvin Safety Supply, Inc. was a 73-year-old, family owned safety supplies distributor that fell victim to the 9/11-business downturn and the bankruptcy of a major customer, losing money for three straight years. Through its private equity fund, Platinum Group gained controlling interest in May 2006 and three Platinum partners brought their turnaround management expertise to the C-level roles. The Elvin family continued to participate in the company as minority shareholders.

Challenges

• Dealing with a bank that was threatening to foreclose.
• Turning around the losses and negative cash flow.
• Changing a top-down managed company that had little inter-departmental cooperation.
• Moving from a product-centric to a customer and solution-centric strategy.
• Integrating a new value proposition into the sales force.

Response

Platinum refinanced the bank debt and changed the cost structure to achieve break even. Software was developed to protect margins during an unprecedented increase in commodity prices. To instill a culture of teamwork and empowerment, Platinum mentored the management team to teach leadership skills, responsibilities and expectations. To reinforce right behaviors, a company-wide bonus program was instituted to reward all employees based on quarterly improvement in cash flow. The shift from selling products to solutions required changing the customer contact from
purchasing agents to risk management, safety and operations executives. By doing so, sales reps learned more about their customer’s safety issues and could recommend the correct product to eliminate injuries. Customers began to understand the value that Elvin Safety could bring to lower their workers’ compensation costs. Sales grew based on value, not price. A new compensation program was based on selling solutions, which enabled the company to generate higher gross margins. In becoming a customer care organization, Elvin Safety:

• developed unique customer-facing tools that allowed Elvin Safety to win larger corporate accounts;
• provided highly specialized servicing programs, specifically tailored to each customer’s unique safety concerns; and,
• improved inventory turns significantly in support of working capital management.

Results

The customer-centric strategy made it easier to win larger corporate accounts. The uniqueness of the value proposition in the market gained notoriety and awards for Elvin Safety. Never the lowest price, the company offered the lowest overall cost to its customers. It continued to improve in cash flow, revenue growth and market share. All of this led to interest from a buyer that desired Elvin Safety’s strength in “high touch” large account management as a great strategic fit. Elvin Safety was sold in January 2010. The outcome was financially rewarding to both majority and minority shareholders.