So, in 1993, Wolverine sold Brooks for $21 million to the Rokke Group, a Norwegian private equity firm. Losses continued for a year before the Rokke Group cleaned out senior management ranks.3 As CEO, it hired Helen Rockey, a hard-charging executive who tried to refocus the brand as an outstanding choice for running aficionados—reverting from “mass to class.”4 The company also expanded into apparel for those same customers.
Yet serial ownership continued. In 1998, the Rokke Group (by then Aker RGI), sold a majority interest in Brooks for $40 million to J. H. Whitney & Co., a Connecticut private equity firm.5 Weber joined Brooks as chief executive in 2001, the fourth person to hold that post in two years. Although Brooks’s profitability improved under Rockey’s leadership with annual sales of $65 million, the company slipped backward into losses under a bloated debt structure.6 Whitney held Brooks only until 2004, when Russell acquired the running shoe company for $115 million. Finally, in 2006, Fruit of the Loom acquired Russell, whose brands also include Russell Athletic, Jerzees, and Spalding, for $1.12 billion.
Weber, through the zigzagging of different owners, always believed that Brooks would succeed best by committing to a niche strategy, manufacturing and marketing running shoes as a piece of equipment for the serious runner. He focused on the high end, shoes selling for $80 to $160 a pair, and exited from the cheaper lines. This move initially slashed revenue to $20 million, but the focus enabled rebuilding. Within a few years, revenue reached $69 million. The pace and ability improved during Berkshire’s ownership, as sales grew steadily along with market share in Weber’s target market.
So that 2011 holiday season, Buffett wondered whether Brooks would benefit from being an independent subsidiary within Berkshire and Weber running his own show.7 Weber agreed that Brooks differed from the rest of Fruit of the Loom, now that it had successfully recommitted to the “class” rather than “mass” approach. He seized the opportunity Buffett offered and continued that momentum. At the Boston Marathon in 2013, for example, more runners wore Brooks shoes than any other brand except Asics.8 Brooks has continued to enjoy exceptional results, with sales of $409 million in 2012, nearly $500 million in 2013, and on target to reach $1 billion by 2020. As a rule of thumb, shoe companies are worth twice sales, making Brooks as valuable today as what Berkshire paid for all of Russell less than a decade ago.
In an interview for this book, Weber attributed acceleration of the company’s prosperous turn to the permanent home that Berkshire offers, in contrast to the corporate homelessness Brooks endured over the previous two decades.9 Management can concentrate without interference and invest in the brand, assuming a fifty-year time horizon rather than focusing on meeting the short-term needs of fickle foster parents. Another reason for the company’s success is Weber himself, an entrepreneur cast in the Berkshire mold, and another winner of Ernst & Young’s Entrepreneur of the Year Award.
Berkshire is not often thought of as an orphanage for the corporate homeless, but it has given permanent homes to many, a Boys Town for business. At least seven subsidiaries found refuge in Berkshire after suffering from serial ownership by successive parents, leveraged buyout operators, private equity firms, or bankruptcy trustees—all working under short-term time frames.
Running the gamut of such overseers is Forest River, Inc., Berkshire’s recreational vehicle manufacturer.10 Its roots trace back to Rockwood, a famous brand name in the field of recreational vehicles, founded in 1972 by Arthur E. Chapman. A few years after founding Rockwood, Chapman sold it to Bangor Punta Corp., a conglomerate that made airplanes, sailboats, and guns. In 1984, Lear Siegler, an even larger conglomerate, acquired Bangor Punta, putting Rockwood into yet a new corporate parent’s hands. These hands changed again in 1986, when Forstmann Little & Co., a leveraged buyout operator, acquired Lear Siegler.
In accordance with the LBO playbook, Forstmann borrowed heavily to acquire Lear and sold off Lear’s assets to repay the debt. Rockwood was sold to Van American, Inc., a company co-owned by Peter J. Liegl.11 He and his partners grew Van American considerably. In 1993, to raise capital for expansion, they sold it to still another LBO operator while remaining in managerial roles. It thereafter went public as Cobra Industries. The company ranked among the industry’s top five, selling travel trailers and motor homes under the Cobra and Rockwood brand names.
The LBO debt, however, made financial life difficult for Cobra. The LBO operators tried to dictate business strategy to Liegl and his colleagues. Disagreements finally resulted in the operators firing Liegl, leaving a vacuum. To fill it, the operators retained consultants who evaluated Cobra top to bottom. Despite such exercises, without competent managers in place, the company floated toward insolvency and filed for bankruptcy in 1995.