In 1996, the bankruptcy court administered the sale of many assets to repay the debt. Buying many of these assets (without the liabilities), including the Rockwood brand name, were Liegl and his new company, Forest River.
With the assets from Cobra Industries, Forest River began manufacturing pop-up campers and travel trailers. During its first three years, Forest River developed three new divisions: cargo, mobile offices, and marine. In the next few years, Forest River acquired three companies while creating another new division internally: Rockport Commercial Vehicles.
By 2005, Forest River generated $1.6 billion in sales.12 Liegel’s ambition was to broaden the company’s manufacturing scope to include every class and type of recreational vehicle. For this, he would need capital. But his harrowing experiences had taught him to be wary of serial conglomerates, LBO operators, and even IPOs.
So in 2005, Liegl sent a two-page fax to Buffett explaining, point by point, why Forest River met Berkshire’s acquisition criteria.13 Buffett had not heard of the company or the man, but the story appealed and the figures added up. He made an offer the next day, and the two had a deal within a week.14
With a permanent home and autonomy, Liegl unleashed his energies to pursue his bold vision for Forest River. It acquired Rance Aluminum Fabrication (2007), Coachmen (2008), Shasta (2010), and Dynamax (2011). Through a combination of such acquisitions and continued internal growth, Forest River now makes every kind of recreational vehicle and several types of related equipment: travel trailers, fifth wheels, pop-up campers, park model trailers, destination trailers, cargo trailers, restroom trailers, mobile offices, and pontoons.
Forest River steadily gained market share.15 It grew from sixty plants in 200516 to eighty-two plants in 2010,17 and from 5,400 employees in 200518 to 7,653 employees in 201219 and 8,770 in 2013.20 The scale pays off in ways traditional manufacturers of recreational vehicles have not exploited: Forest River’s vast production capacity enables it to fulfill customer orders quickly while maintaining rigorous construction and inspection standards. Results have been impressive: 2010 sales neared $2 billion with record earnings, and 2013 sales surged to $3.3 billion, up 24 percent on the year.21
When announcing Berkshire’s acquisition, Liegl was quoted in an industry trade journal:
[We are] guaranteeing as much as is humanly possible the continued existence of Forest River. Specifically, Berkshire Hathaway buys companies and keeps companies. They have the horsepower to do it, and by the same token, it’s not a high wire act like it might have been if we had sold to an investment group. Forest River had no debt before this, and Forest River has no debt after this.22
Coping with the crushing debt burden of leveraged buyout operators was also the route to Berkshire taken by Oriental Trading Company. Begun in 1932 by Harry Watanabe, a Japanese immigrant living in Omaha, Oriental Trading was a retail shop selling novelties, like Kewpie dolls, imported from his home country. The store prospered, and Watanabe soon operated a dozen similar stores in the Midwest. World War II’s restrictions on Japanese imports, however, spelled closure for all stores outside Omaha. Thereafter, Watanabe added ceramics to the product line and pursued carnival operators as customers, a prosperous niche through the early 1970s.
In 1977, Harry’s son, Terrance (“Terry”) Watanabe, expanded on his father’s business model. Terry added toys and party goods to the product line and began a direct-sales marketing campaign targeting organizations hosting fundraising events, such as churches, clubs, and schools. Terry amplified the direct-sales business by marketing through a widely distributed product catalogue and an extensive door-to-door sales network. He added toll-free telephone ordering in the 1980s and leveraged the Internet in the 1990s.
By 2000, Oriental Trading offered 40,000 products to a customer list numbering in the tens of millions while employing nearly 2,000 workers. At that time, Terry tapped capital from private equity firm Brentwood Associates. The plan was for Brentwood to supply funds and Terry and his team to continue to manage. That arrangement changed, however, and Terry wound up selling his entire interest to Brentwood and resigning from his positions.
By 2006, Brentwood sought an exit strategy.23 It partially succeeded when it arranged for the Carlyle Group to acquire a majority stake (68 percent) in Oriental Trading in a leveraged buyout. Despite a huge mailing list and annual sales of $485 million on assets of $463 million, the high cost of debt led the company to file for bankruptcy in 2010 when liabilities reached $757 million.24 During bankruptcy, yet another LBO firm, Kohlberg Kravis Roberts, bought a large portion of the company’s debt, which it hoped to sell at a profit or convert into equity.