Case Study: Soft Sheen Products, Inc.

Soft Sheen was a family owned, manufacturer and distributor of hair care products.  During a period of severe financial difficulties and operational disruptions, the CEO and eldest son of the founders resigned under pressure and was replaced by another family member who did not have the experience to deal with the many operational and financial restructuring issues that existed. Our assignment was to provide interim management assistance in key functional areas during the required business turnaround.

Our analyses revealed organizational issues such as unclear authority and responsibility, insufficient information dissemination, poor production planning resulting in out of balance inventories, poor customer service, vendor distrust and purchasing challenges, and significant weaknesses in both factory and financial controls.  The company was losing market share, experiencing a liquidity crisis and facing lender pressure resulting from a default under it senior credit facility.  Actions initiated included holding daily management/planning meetings to guide the CEO, changing production planning and scheduling in order to increase on-time order fulfillment and improve customer service, the installation of cash flow measurement and control systems and the upgrading of management information systems.  Soft Sheen’s Brazilian, Jamaican and South African subsidiaries were restructured and all family-related, non-company activities were transferred to a separate entity to improve clarity of company performance and financial statements.

A major turnaround in operational performance, profitability and liquidity was achieved.  Customers’ out of stocks were dramatically reduced thereby eliminating store shelf displacement by competitors.  Bank debt was paid down by approximately $10 million, and a new credit facility was put in place providing borrowing capacity.  Equity value rose from zero at the commencement of the project to approximately $100 million.  Within one year of the project’s completion, the founding family was able to realize the full value of its equity stake in cash when a large European multi-national consumer products company acquired the company.  Having gained valuable experience during the turnaround, the CEO continued managing the company after the buyout and led the roll up of key competitors for the buyer.