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Home » Blogs » Ken MacFadyen

Finding Value in Strange Places

By Ken MacFadyen, MU Blog

April 6, 2010

On the last day of March, Oshkosh Corp. was finally able to move on from its troubled Geesink Norba acquisition, when a US District Court judge dismissed a lawsuit claiming that the company fraudulently delayed taking a writedown on the assets.

Oshkosh had acquired the garbage truck maker in 2001 for $175 million and promptly saw the business put up over $40 million in losses over the next four and a half years. The judge, in a 44-page ruling, basically reasoned that the complexities of the business, and a foreign market that was in flux, excused the buyer from claims that it should have known sooner how bad the situation was. Oshkosh didn't take a writedown until 2008 and a year later conceded defeat when it sold the business.

The buyer, as it turned out, was Platinum Equity -- a firm that made a living on these types of deals. Platinum founder Tom Gores, coincidentally, won our 'Pro of the Year' award for 2009. Geesink Norba, when you consider Platinum also made bets in newspapers, auto parts and commercial real estate last year, may actually be one of the easier turnaround efforts for the firm.

In speaking with Gores, he divulged quite a bit about the firm's strategy and how he can find comfort in sectors that are too hot even for people who may live in the space. (A Q&A can be found here.) This is the quote that stuck out to me: "Our base case is most people's worst case. And our worst case, most people don't like to think about."

Of course, there are other areas Gores touched upon, such as operational capabilities and value, but I think the way Platinum models their deals -- assuming the worst -- is one of the reasons the firm has managed to post returns in good and bad times. It's not always convenient, especially in a competitive situation, but it's what allows the firm to find value in strange places.

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