The Holmes Group: Supporting strategic growth
The Holmes Group (Holmes) is a leading developer, manufacturer and marketer of kitchen products including Crock Pot slow cookers and Rival cookware; and home comfort appliances which include Holmes and Bionaire fans, heaters, humidifiers, and air purifiers. Holmes sources most of its products from China, and approximately half of its Chinese products, including electric motors, are manufactured in wholly-owned facilities. Holmes' deep experience with such low cost offshore manufacturing, as well as its leading new product development capabilities, have enabled the company to win very high shelf penetration with most large retailers active in the kitchen and home comfort segments.
Berkshire invested in Holmes in 1997 in a recapitalization that bought out the company's U.K.-based parent and again in 1999 in conjunction with Holmes' acquisition of the Rival Corporation.
What did Holmes seek from a private equity investor?
Holmes' founder had two objectives in originally speaking with Berkshire. He wanted to find a partner who was more aligned with his desire to pursue strategic growth initiatives, and he wanted a close relationship with sophisticated investors who could help him with financial and strategic planning as well as think through the operating challenges that confronted him in his rapidly growing but intensely competitive and logistically complex business. He knew he wanted help, and the Berkshire resources and operating style were definitely attributes that he highly valued.
Berkshire's role
In the almost eight year tenure of this investment, Holmes' management and the Berkshire team worked on a major acquisition, a necessary restructuring to adjust for the slower than expected performance improvement of this acquired product line, searches for additional operating talent, multiple operating plans to address channel and growth issues, and finally, strategic M&A initiatives to either acquire or be acquired by complementary businesses that would ensure continued growth and scale to maintain Holmes' market leadership in its chosen categories.
To focus on some of the highlights, in 1999 Holmes acquired Rival, a publicly-traded manufacturer and marketer of small kitchen appliances. Berkshire played a very close role assisting with the planning for and execution of this acquisition. In the subsequent period of underperformance, Berkshire provided both financial and analytical support to assist Holmes in overcoming the operating challenges that arose from integrating the two companies. Berkshire's financial investment in the combined company peaked at approximately $65 million, and additionally Berkshire provided a guarantee of approximately $45 million to support the company's outstanding debt. After a lot of hard work, the merits of the original business plan were realized, and Holmes resumed its long term growth trend with a now broader and more diverse mix of product segments and brands.
Outcome
After enjoying an extended period of strong operating performance and evaluating a number of strategic alternatives, in 2005 Holmes' management and the Berkshire team chose to merge with Jarden Corp., makers of Coleman camping products, Sunbeam kitchen products and a diversified array of other strong niche businesses. The resulting enterprise is well situated to continue to grow from its strong market share positions as the product lines are very complementary, with Holmes' offshore manufacturing strengths an added advantage. After such an intense and extended period working so closely together, the Holmes and Berkshire teams were well satisfied with this next stage of development for the Company as well as the ultimate performance of the investment.