MBO Case Study – Caremark / Clinovia

CMC Partner David Brassington led the turnaround of a poorly performing service business following a Management Buy-Out.  Over a 2 year period profits increased from £0.6million to £3million and the business was subsequently sold at 5x the acquisition price.

Background

Caremark Ltd provided specialised healthcare services to the NHS and pharmaceutical companies.

The company had experienced 2 years of uncertainty as its US parent had attempted to sell the business.

The business was acquired through a Buy-Out by a management team led by David Brassington with financial backing from Foreign and Colonial Ventures and Bank of Scotland.

The business situation at the time of acquisition was:

  • Sales £27 million.
  • Profit £0.6 million.
  • 120 employees.

Turnaround Process

The main components of the business plan consisted of:

  • Restructuring the business to create small teams dedicated to specific customer groups. As part of this process employee numbers were reduced by 25, to reflect current trading and the new business structure.
  • Developing an effective dialogue with all employees to ensure that they:
    • were aware of plans for the business and the results being achieved;
    • understood the expectations of them;
    • felt able to contribute effectively to improving business performance.
  • Rebuilding relationships and working practices with customers to re-establish trust and improve satisfaction.
  • Establishing effective financial control and cash management processes.
  • Expanding manufacturing capacity to improve service levels and profit margins.
  • Rebranding the business to reinforce the transformation process

Outcome

Results after 2 years:

  • Financial results had improved significantly:
    • Sales £33million
    • Profit £3million
  • Improved financial management and cash flow had allowed loans to be repaid ahead of schedule
  • Customer satisfaction had improved significantly
  • Employee satisfaction had improved, and turnover reduced
  • 2 potential buyers approached the business. A successful sale process achieved 5x the acquisition price, paid in full following a trouble free due diligence process.

“I have experienced many restructuring processes within portfolio companies. This is the first that has delivered the predicted results, on time and within budget!”

Investment Director. Foreign and Colonial Ventures

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