Case Study 04

Clarity sells a domestic foundry during the recession of '01-03

Situation

The client operates two domestic investment casting operations, both of which run a combination of captive and external parts. The client is carrying excess capacity due to the recession and elects to divest one of its foundries.

Outcome

Clarity's analysis of the situation revealed that investment casting continues to move off shore and the domestic market has serious over capacity despite many recent foundry closings. Clarity identified two types of strategic buyers; competing foundries (preferably investment casting but including sand casting and other) and domestic manufacturers which currently outsource their substantial volume of investment castings. Despite our efforts to create an auction environment, the gravity of factors working against this deal forced Clarity into a case by case approach. Each prospect required active hand holding and creativity to model a framework that might justify the deal. The ultimate buyer negotiated contractual requirements for the client to retain certain casting runs from his own operations in the plant for a specified time. Clarity also facilitated consensus among several state and local economic development offices to amend existing debt structure to transfer low and zero interest debt to the new owner. In the end, Clarity completed a deal with a prudent buyer under difficult circumstances, preserving the client's capital and scores of local jobs.