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How Mitt Romney's Firm Transformed A Struggling Company, In 5 Steps

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Mitt Romney says his experience in private equity taking over troubled companies would make him a good manager of America's economy. So we're reporting on companies that Bain Capital bought while Romney was in charge of the firm. This morning, we told the story of one that went bust. Here's the story of one that succeeded.

How A Private-Equity Firm Turns A Company Around

Step 1: Find a little company that's lost inside a big company.

In 1995, Wesley Jessen was a struggling division of Schering Plough, a big drug company. "We were not a very profitable company at all," says Bill Flynn, who worked in Wesley Jessen's finance division at the time.

Wesley Jessen had a valuable patent for color contacts. Michael Jackson wore Wesley Jessen color contacts in the Thriller video.

But the color contact lenses they made were the kind that you kept for a year. When disposable lenses got popular, Wesley Jessen couldn't keep up.

Bain saw potential in the company. So they came in and bought it. Like most private equity deals, it was done mostly with borrowed money. Bain put $6.5 million down, and borrowed another $43 million.

Now, they had to pay interest on all that debt, while turning the company around. The key to doing so:

Step 2: Hire the right leader.

Bain brought in a guy named Kevin Ryan to run Wesley Jessen. He's widely admired as a smart, charismatic, hard-working exec.

Right off the bat, Ryan temporarily halted all manufacturing. Doctors had been stuck with a glut of color contacts, and Ryan asked them to send back what wasn't selling.

"What that did was make for an inventory nightmare," says former controller, Ron Artale. "But-- it made for a lot of credibility with the doctors."

Step 3: Focus on the customer.

Lenses were being sent out in packs of three — oddly, given that people have two eyes. Ryan changed it to packs of six. He cut prices and expanded the sales force all over the country to figure out what the doctors wanted.

Step 4: Focus.

The company had a plant in Puerto Rico making conventional lenses that weren't selling well. Ryan saw that colored contacts were the company's key niche, so he had the plant start making custom lenses. One popular product was "Wild Eyes" — lenses with thunder bolts,concentric circles, yellow lenses. For Halloween. Wild Eyes were a hit.

To expand Wesley Jessen's business, Bain borrowed approximately $70 million to buy another company, Pilkington Barnes-Hinds, with international capacity.

Step 5: Reward.

In 1997, Bain took Wesley Jessen public. Executives and managers, who hadn't received a raise since Kevin Ryan showed up, got bonuses and cashed in the stock options they'd received instead. Workers received cars and other prizes.

Wesley Jessen was ultimately bought by another company, Ciba Vision. Bain walked away with $300 million.

Not all of Bain's deals turned out this well — a number of the firm's investments end in bankruptcy. But Wesley Jessen is still in business today.

Copyright 2021 NPR. To see more, visit https://www.npr.org.

Zoe Chace explains the mysteries of the global economy for NPR's Planet Money. As a reporter for the team, Chace knows how to find compelling stories in unlikely places, including a lollipop factory in Ohio struggling to stay open, a pasta plant in Italy where everyone calls in sick, and a recording studio in New York mixing Rihanna's next hit.
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