After seventeen years at the helm, Richard Salvage sold medical equipment company Shield Medicare in 2006. Five years on, he reflects on the preparatory work that is essential for a successful exit.
When you sold Shield, the company was established as market leader in the supply of medical equipment for cleanroom environments. To go back to the beginning, how did you get involved in that line of business?
I studied mechanical engineering at University and then went on to do post graduate work, which involved spending time at Kings Hospital looking at how surgical procedures could be improved by employing engineering techniques. After that I got a job in medical equipment sales arena – it was an opportunity how to design a product and take it to the market. My next step was to set up my own company. Initially I established Shield to export on behalf of other companies but as far I was concerned it was inevitable that I would control my own manufacturing.
Shield found a niche in supplying equipment for ‘clean rooms’. How did you identify that market?
When I was setting up my own cleanroom, I found that it was very hard to get equipment. I drew the conclusion that if it was hard for me, it would be hard for other organisations too. I saw there was a market supplying products for clean room environments to the NHS and pharmaceutical companies.
When did you decide that you were going to sell the business?
I was approached to sell which came as a complete surprise, but it did get me thinking about what an exit would mean for me. If one company was interested then there would probably be others. I decided that if the price was right I would sell and so I began to groom the business.
GROOMING FOR SALE
What were the key elements of that grooming process?
There are two things that you really have to get right before you sell. First of all you have to have an effective management team in place. If you – as the founder – are seen as integral to the business then the value will be less. It’s important that you can demonstrate that the management team is credible. To do that you have to measure and monitor what they do.
The second vital factor is ensuring you have very robust systems and processes in place throughout the business from sales and marketing through to product development, operations and customer service. The trick is to have processes that are rigid, but also flexible enough to respond to customer needs. Again you need to measure and monitor the processes and systems.
You put a lot of emphasis on measuring and monitoring?
Yes, if you put yourself in the position of someone who is interested in buying the business , they will be presented with a package of information about the company. The due diligence process that follows is all about the buyer seeking assurance that the information is accurate. Monitoring and measuring your processes and management provides some of the assurance that is required.
What do you see as the biggest pitfall of the exit process?
There is a real danger that performance will slip. You have to do your day job and deal with what can be a very intrusive process. That’s another reason why it’s important to have a good management team in place – it allows you to focus on the exit.
Did you plan for your life after the sale?
Yes – I think it’s really important to look forward. In my view, walking towards something is very fundamentally different from walking away from something.
As Group Director of the Medsa Group you’ve clearly remained very active as a businessman. Was that your intention?
I always enjoyed the building and implementing the processes and systems and I thought that was something that could be applied to any sector. That’s very much what I’ve focused on – finding businesses that could benefit from improved processes, particularly in the area of sales. At the moment I have interests in the auto, recycling and medicare sectors and I also lecture at Cranfield Business School.
