LESSONS FROM A MIDDLE MARKET LBO: THE CASE OF O.M. SCOTT

In 1986 The O.M. Scott & Sons Company, the largest producer of lawn care products in the U.S., was sold by the ITT Corporation in a divisional leveraged buyout. The company was founded in Marysville, Ohio in 1870 by Orlando McLean Scott to sell farm crop seed. In 1900, the company began to sell weedfree lawn seed through the mail. In the 1920s, the company introduced the first home lawn fertilizer, the first lawn spreader, and the first patented bluegrass seed. Today, Scott is the acknowledged leader in the “do-it-yourself” lawn care market, with sales of over $300 million and over 1500 employees. Scott remained closely held until 1971, when it was purchased by ITT. The company then became a part of the consumer products division of the huge conglomerate, and operated as a wholly-owned subsidiary for 14 years. In 1984, prompted by a decline in financial performance and rumors of takeover and liquidation, ITT began a series of divestitures. Over the next two years, total divestitures exceeded $2 billion and, after years of substandard performance, ITT's stock price significantly outperformed the market. On November 26, 1986, in the midst of this divestiture activity, ITT announced that the managers of Scott, along with Clayton & Dubilier (C & D), a private firm specializing in leveraged buyouts, had agreed to purchase the stock of Scott and another ITT subsidiary, the W. Atlee Burpee Company. The deal closed on December 30. Clayton & Dubilier raised roughly $211 million to finance the purchase of the two companies. Of that $211 million, almost $191 milion, or 91% of the total, was debt: bank loans, subordinated notes, and subordinated debentures. The $20 million of new equity was distributed as follows: roughly 62% of the shares were held by a C & D partnership, 21% by Scott's new subordinated debtholders, and 17.5% by Scott management and employees. After this radical change in financial structure and concentration of equity ownership, Scott's operating performance improved dramatically. Between the end of December 1986 and the end of September 1988, sales were up 25% and earnings before interest and taxes (EBIT) increased by 56%. As shown in Table 1, this increase in operating earnings was not achieved by cutting back on marketing and distribution or R & D. In fact, spending on marketing and distribution increased by 21% and R & D spending went up by 7%. Capital spending also increased by 23%.     

The local economic impact of construction projects in a small and relatively self-contained economy: The case of Lancaster University

Whilst the local multiplier impacts of the annual operation of universities has been the subject of intensive research, the economic impacts of capital construction projects have been almost completely ignored. This paper presents the results of detailed analysis of capital projects at Lancaster University in 1993-The reasons for the radically different annual operation and construction multipliers estimated in the Lancaster study are examined. Despite the smaller size of construction multipliers it is argued that it is a serious mistake to estimate local construction multipliers by making simplifying assumptions on the size of the key parameters in the multiplier equations.     

Two-Part Trade Policy under Imperfect Competition

In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a two-stage game of complete but imperfect information. In the first stage, the domestic government sets trade policy, while in the second stage the home and foreign producers behave as Cournot competitors. The paper demonstrates that the optimal trade policy depends upon the number of firms, the degree of heterogeneity in cost functions, and the degree of convexity in cost functions.     

Information technology developments and implications for national policies

A review is made of the global status of information technology (IT) development and new opportunities identified for government IT policies. Despite operational problems, IT innovations continue apace. Poor human-computer interaction, user friendliness and lack of standardization are all key issues which must be addressed. Globalization trends, east-west politicomilitary changes and third world development, all have implications for government IT policies over the coming decade—and the right directions must be pursued now to derive real benefits from IT and move towards a true information economy.     

The impacts of Hong Kong’s Currency Board reforms on the interbank market

Among the economies with a Currency Board System (CBS), Hong Kong (HK) is probably the one with the largest and most developed financial sector, as well as the highest capital mobility. Hence, studying HK’s CBS is not only crucial to HK, but also important for the understanding of the modern CBS. This paper outlines the major monetary reforms in HK since the late 1980s. The impacts of these reforms and the 1997–1998 Asian Financial Crisis are then examined empirically. We focus on the differentials between the US and HK interbank interest rates. We assume the conditional-mean equation follows an autoregressive process and the conditional-variance equation follows a generalized autoregressive conditional heteroscedasticity process. This model captures the time-varying level and volatility of the differential. In light of the empirical results we provide an assessment of the reforms in HK.     

New climate change scenarios for the Netherlands.

A new set of climate change scenarios for 2050 for the Netherlands was produced recently. The scenarios span a wide range of possible future climate conditions, and include climate variables that are of interest to a broad user community. The scenario values are constructed by combining output from an ensemble of recent General Climate Model (GCM) simulations, Regional Climate Model (RCM) output, meteorological observations and a touch of expert judgment. For temperature, precipitation, potential evaporation and wind four scenarios are constructed, encompassing ranges of both global mean temperature rise in 2050 and the strength of the response of the dominant atmospheric circulation in the area of interest to global warming. For this particular area, wintertime precipitation is seen to increase between 3.5 and 7% per degree global warming, but mean summertime precipitation shows opposite signs depending on the assumed response of the circulation regime. Annual maximum daily mean wind speed shows small changes compared to the observed (natural) variability of this variable. Sea level rise in the North Sea in 2100 ranges between 35 and 85 cm. Preliminary assessment of the impact of the new scenarios on water management and coastal defence policies indicate that particularly dry summer scenarios and increased intensity of extreme daily precipitation deserves additional attention in the near future.     

Development of an empirical mathematical model for describing and optimizing the hygiene potential of a thermophilic anaerobic bioreactor treating faeces.

Poor sanitation and insufficient disposal of sewage and faeces are primarily responsible for water associated health problems in developing countries. Domestic sewage and faeces are prevalently discharged into surface waters which are used by the inhabitants as a source for drinking water. This paper presents a decentralized anaerobic process technique for handling of such domestic organic waste. Such an efficient and compact system for treating faeces and food waste may be of great benefit for developing countries. Besides a stable biogas production for energy generation, the reduction of bacterial pathogens is of particular importance. In our research we investigated the removal capacity of the reactor concerning pathogens, which has been operated under thermophilic conditions. Faecal coliforms and intestinal enterococci have been detected as indicator organisms for bacterial pathogens. By the multiple regression analysis technique an empirical mathematical model has been developed. The model shows a high correlation between removal efficiency and both, hydraulic retention time (HRT) and temperature. By this model an optimized HRT for defined bacterial pathogens effluent standards can be easily calculated. Thus, hygiene potential can be evaluated along with economic aspects. In this paper not only results for describing the hygiene potential of a thermophilic anaerobic bioreactor are presented, but also an exemplary method to draw the right conclusions out of biological tests with the aid of mathematical tools.     

Implementation of sustainable sanitation in existing urban areas: long-term strategies for an optimised solution.

If technologies for decentralised sanitation and reuse (DESAR) and for natural stormwater management should at least partially replace existing systems, then intensive reconstruction work becomes essential. A conversion can only be realised successively over a long period due to high construction and financial expenses and requires new strategies. This paper presents the development and practical implementation of a mathematical tool to find an optimised strategy for the realisation of alternative and more decentralised drainage and sanitation concepts in existing urban areas. The succession of construction measures (e.g. the implementation of decentralised greywater recycling) for the whole period of consideration is determined based upon a mathematical optimisation model on the condition that the favoured future state is known. The model describes the complex interdependencies of the urban water and nutrient cycle and enables the minimisation of both financial efforts and ecological impacts on the way toward the future state. The results of the implementation for a rural area in Germany show that the mathematical optimisation is an adequate instrument to support decision-making processes in finding strategies for the realisation of sustainable urban water management.     

Assessment of Capillary Rise from Shallow Groundwater by the Simulation Model SIMWASER Using Either Estimated Pedotransfer Functions or Measured Hydraulic Parameters

The performance of the water balance and crop growth model SIMWASER to estimate the water supply of a lawn by capillary rise from shallow ground water was investigated by using lysimeter measurements with a sandy and a clayey soil. Moreover the robustness of the model was evaluated by running it either with measured hydraulic soil parameters or with estimated pedotransfer functions (PTFs) derived from texture and bulk density. Simulations were performed for the years 1996–1998 with input data from the lysimeter station Berlin-Dahlem (Germany) for lysimeters containing undisturbed sandy or clayey soil monoliths, with groundwater at 135 cm depth. Simulated evapotranspiration and percolation/capillary rise were in good agreement with the measured data for all variants, while simulated soil water storage was acceptable only for the variants using hydraulic soil data based on laboratory measurements or using PTFs derived from known soil class and bulk density. PTFs based on mean total pore volume of the respective soil classes yielded soil water storages which were evidently too high; therefore they should be used with care and must be avoided at all in simulating the soil water balance of arid sites with shallow groundwater.