Word: kote
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Dates: during 1980-1989
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...units of U.S. companies have been acquired by their managers since 1982, and it is a blue-chip list: the Montgomery Ward department-store chain, bought by its executives from Mobil; the former ITT subsidiary that makes Scott lawn products; the onetime Unisys unit that produces Nu-kote ribbons for typewriters and computer printers. "Management buyouts create powerful incentives for entrepreneurship, risk taking and long-term planning," says Martin Dubilier, chairman of a New York City investment firm that bankrolls many executives seeking control of their companies...
...executives who bought Nu-kote also felt ignored by their corporate parent. After the 1986 merger of the Burroughs and Sperry computer companies that produced Unisys, corporate headquarters decreed in a confidential memo that "ancillary" units would be put on the auction block. Reinhold Tischler, then president of the Nu-kote division, called his boss and said, "Ancillary division reporting in. We'd like to buy it." On Jan. 16, 1987 -- Tischler calls it Independence Day -- he and 20 other managers bought Nu-kote for $60 million. After they eliminated several aging product lines, overall sales grew 17% last year...
Despite such impressive showings, most of the companies that have been bought by their managers are weighed down by debt. Scott's $133 million in outstanding obligations is more than five times as great as its shareholders' equity. Nu-kote's $55.6 million in debt amounts to more than eleven times equity. If sales plummeted or interest rates rose, those debt loads could become crippling burdens. The new manager-owners have made a good start at running their companies, but the test will come during the next economic downturn...