Point 2 - 2/11. FINAL - Bridgepoint Capital

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FEATURE: ANATOMY OF THE DEALligenceservice beauty store with a loyaltyprogramme and treatment rooms forcustomers, is most likely to appeal.At Jessops, Tim Brookes was keen tobuild the business through a mixture ofacquisitions and modernisation. He addedover 90 stores to the portfolio by snappingcess and the chemistry has to be right.”Creating valuef the dealnd its market stack up?via efficiencies and exploitation of fast-growing market,via a buy-and-build strategy,or by break-upExitingby trade sale or flotationup rival retailers Crew Camera, Cequipand Tecno, bringing the total to morethan 230. He also encouraged hisknowledgeable and enthusiastic staff totake the initiative and generate ideasinstead of waiting for instructions fromhead office.As the portfolio grew he was alsoable to rationalise the company’s administrationand distribution.“I had a clear view about where thebusiness should go,” Brookes explains.“Jessops had a great brand. It was aquestion of tinkering rather than changingthe culture, because if you go too fast youlose what is special.”Most importantly, Brookes was able tocapitalise on the increase in demand fordigital cameras, one of the fastest-growingmarkets in the UK retail sector. In the yearto last September, sales of digital productsincreased by a huge 47 per cent. As aconsequence profits have rocketed by 73per cent over the last three years to€21.3m, despite the company spending anextra €2m per annum on staff training.Managers in Bridgepoint’s businesseswork hard because they are committedand because they have a substantial stakein the companies they are running.Brookes invested €240,000 when hejoined the team, giving him a 15 per centslice of the business. Together, Nocibé’smanagement will own a 22 per cent share.“The difference between us and corporateinvestors is that we give our managementteams meaningful equity stakes in thebusiness,” Reynolds says.Often Bridgepoint employs ‘rachets’ or“The differencebetween us andcorporate investors isthat we give ourmanagement teamsmeaningful equity”incentives where managers receiveadditional equity of the business ifdemanding performance-related goals areachieved. Managers are also encouragedto draw up their own plans instead ofsimply following orders. “I have a financialincentive to deliver but they also give meroom to work,” de Costanzo insists.Companies can expect to be givenbetween three and five years to build valuebefore the investment is realised. At themoment trade sales are the most commonexit route, followed by secondary buyoutsby other financial buyers, and finallyflotations. The exact timing will usuallydepend on the investment’s natural lifecycle, but if a potential buyer showsinterest, then Bridgepoint and managementwill explore options quickly.Just two years after acquiring Britishsnack manufacturer Golden Wonder,Bridgepoint sold the business on toPepsiCo and Longulf, the owner of SnackFactory. The US consumer giant had firstbid for the company when BridgepointCompanies canexpect to be giventhree to five years tobuild valueacquired it from Legal & General back in2000 and its interest in the company – andparticularly the Wotsits brand – remainedstrong. At that time, Bridgepoint had beenable to offer L&G a good price because itwas very familiar with the company and itschief executive Clive Sharpe, formerly incharge of the food group Homepride.“We’d owned a minority stake in thebusiness since 1995 and we thought therewere attractive growth prospects,”explains Bridgepoint’s Guy Weldon.Sharpe’s strategy involved stripping outcosts by reorganising the supply chain andboosting sales by spending on promotion.But when Bridgepoint found it couldline up a buyer – Snack Factory – for thepart of the business that PepsiCo wasbarred from acquiring by competitionrules, it judged that an exit made sense.“With many secondary buyouts, theconcern is always whether there is enoughpetrol in the tank to fuel returns,” Weldonsays. “Our judgement was proved right.”With market conditions difficult, dealswith a choice of exits are particularlypopular. Nocibé could appeal to a range oftrade buyers, including food multiplesthat plan to diversify, or private equityplayers prepared to tackle further internationalexpansion.“One of the most attractive thingsabout the deal is that the exitopportunities are so wide,” observesValerie Texier of Bridgepoint’s Paris office.In a few years her prediction mayprove correct. Bridgepoint has spentalmost 12 months checking that thebusiness plan is sound, the management isstrong and the cosmetics market isgrowing. If her calculations are correct,Bridgepoint and Nocibé could well besmelling success.THE POINT 11
INTERVIEWRobert Waley-Cohenstarted out at Christie’s.Today he runs AllianceMedical, Europe’s biggestscanning business. He tellsHelen Dunne his storyFACET OFACEHealthy AllianceToday a handful of cancer sufferers inthe UK will have a PET Scan. They will beinjected with a radioactive isotopeproduced in a revolutionary piece ofequipment called a cyclotron, which hasbeen attached to a glucose molecule.The tumours in their bodies will thenglow like lighthouses in the dark, allowingradiologists to pinpoint the exacttreatment required.To Robert Waley-Cohen, chiefexecutive of Alliance Medical, who hasseen many advances in his 20-yearhealthcare career, the PET Scan is perhapsthe most exciting. Previously undetectedtumours may be spotted and treated; whilesome patients sadly learn treatment is ofno help, about half the patients who havea PET Scan have their treatment altered.The scan creates major logisticalproblems for Alliance Medical, Europe’sleading supplier of MRI services whichowns 80 scanners. Once injected, thepatients are radioactive. “How do you getthe radioactive isotope to the patient?How do you get the patient to be imaged?Even their pee is radioactive,” musesWaley-Cohen.It’s why the next stage in the 13-yearhistory of Alliance Medical will be theestablishment of a five-storey scanninghospital in London’s fashionableMarylebone district, containing everyimaginable type of scanner. Patients needa referral from their doctor, but canexperience scanners that may not beavailable in local health districts.As is the way with careers, Waley-Cohen fell into healthcare. His began atChristie’s, the auction house in 1969.“They taught you to use your eyes, tolook properly at things and articulatewhat you were seeing,” Waley-Cohenexplains. Today he doesn’t just see amug. He sees a cream earthenware mugwith a lipped base and chipped handle,12 THE POINTfilled with steaming coffee.“You get quicker at it,” he says. “Youdon’t look for an extended period, but youenhance what you do see.”After twelve years, Waley-Cohen wasfrustrated. “I got to a level of senioritythat, until people retired, I didn’t seemyself going any further.“You can only not be in charge for solong before I think you get to the pointwhere you can't actually take charge.”The experience clarified matters.Waley-Cohen’s passions are art andracehorses – he has ridden three timesat Aintree in amateur races – but afterChristie’s he ruled out working ineither industry.“I understood about service, aboutselling to trade, but I didn’t know aboutmanufacturing or selling to the public.”He was intrigued by changes in thepayment system for American healthcareand studied a report about everyconceivable ailment, from in-growing toenailsto open-heart surgery, and relatedtreatment cost.“In America hospitals are verycompetitive. If a patient comes to ahospital and it’s incapable of doing adiagnostic procedure, he will go toanother hospital and stay there fortreatment,” explains Waley-Cohen.He spotted an opportunity to buyexpensive equipment and rent it tomedium sized hospitals, persuadingtwo friends – his wife’s cousin NickSamuel (now LordBearsted), a scion ofThe tumoursthe Hill Samuelbanking dynasty, and in their bodiesPeter Greenall (nowglow likeLord Darsbury) of thebrewing family – to light-housesback him. Theyin the darkrecruited Rick Zehner,who worked for anCAREER PROFILERobert Waley-Cohen: chief executiveAlliance MedicalBorn: 10 November 1948 in London.Married to Felicity. Four children aged 18 to 25.Educated: Eton. “I had disastrous examresults and didn’t go to university.”Started out as: City stockbroker for sixmonths. “I can’t remember its name. One tendsto blank out awful memories. My father, aLloyd’s underwriter who had been a Lord Mayorof London, organised it.”Biggest break: “Meeting Rick Zehner.”Biggest mistake: “Not mentioning meetingmy wife was my biggest break...no really, lots ofthem. Couldn’t mention one.”Drives: Mercedes CoupéLife ambition: “Do people really answer that?I couldn’t begin to, it is such a huge question.”
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Point 2 - 2/11. FINAL - Bridgepoint Capital

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