Turnaround Value & Valuation: Reassessing Scott Paper

Journal of Private Equity, pp. 67-78, Winter 2011

Posted: 29 Nov 2011

See all articles by Joseph Calandro, Jr.

Joseph Calandro, Jr.

Fordham University - Gabelli Center for Global Security Analysis

Date Written: November, 28 2011

Abstract

This paper presents an approach for assessing turnaround opportunities that entails both pre- and post-turnaround valuation considerations, as well as exit planning. The approach is illustrated by way of the Scott Paper Company (Scott) turnaround. In April of 1994, Scott appointed “Chainsaw” Al Dunlap, Chairman and CEO with a mandate to turn the firm’s poor performance around. Slightly more than one year into the turnaround, Scott’s value increased from approximately $2.8 billion on the market to approximately $9.4 billion via Kimberly-Clark’s acquisition price. We show how Scott qualified as a turnaround opportunity using our approach prior to Dunlap’s appointment, and how a conservative exit plan could have been formulated following his appointment. Conservative exit planning mitigates execution risk, which could manifest in a variety of ways, as we discuss. The approach presented in this paper could be significant from a private equity perspective because, according to some observers, there is a scarcity of professionals skilled in turnaround analysis and management. If that observation is correct, turnaround-related opportunities could emerge if current economic risks manifest and corporate returns decline.

Keywords: Turnaround analysis, valuation, exit planning

JEL Classification: G34, G39

Suggested Citation

Calandro, Jr., Joseph, Turnaround Value & Valuation: Reassessing Scott Paper (November, 28 2011). Journal of Private Equity, pp. 67-78, Winter 2011 . Available at SSRN: https://ssrn.com/abstract=1965742

Joseph Calandro, Jr. (Contact Author)

Fordham University - Gabelli Center for Global Security Analysis ( email )

531 Hughes Hall
441 E. Fordham Rd
Bronx, NY 10458
United States

HOME PAGE: http://www.linkedin.com/in/josephcalandro/

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