Description
About the business
ProActive Prosthetics Limited, a premium prosthetics business based in Godalming, Surrey, was bought by a PE-backed prosthetics and orthotics provider.
Having run the business for c.25 years, the two main shareholders appointed Polestar on the mandate so they could retire.
When examining the business, Polestar identified key valuation drivers, built around ProActive’s cutting-edge solutions, well-equipped clinics, and excellent referral network; there were many strong aspects of the business that would position it well at market.
ProActive’s main site in Godalming is the only private prosthetic clinic in the UK to have purpose-built facilities. Additionally, the company’s industry-leading reputation resulted in its partnership with the GB Paralympic team, supporting the country’s athletes at the 2012, 2016, and the delayed Tokyo 2020 games. ProActive was a member of Team GB in Japan to support athletes in person, including Sophie Kamlish, Stef Reid, Richard Whitehead, and Jonnie Peacock.
Polestar’s role
Polestar worked with the shareholders to identify the key selling points and establish why a potential acquiror would be interested in the business. This process helped develop the Information Memorandum (IM), the buyers list, and other related sale information that would be used in the sale process.
An IM is important to the sale process as it explains all aspects the business in detail: for example, ProActive created all its prostheses in-house, so it was important to outline the manufacturing process thoroughly as well as all the different types of products the Company created.
The IM then forms the bedrock of a competitive selling process, allowing a well-controlled auction to be run, with all bids made based on the same information. Buyers nearly always place a higher value on the business when its sale process is being professionally advised.
A well-positioned IM communicates key messages to the potential buyer:
- Highlights the strengths and potential of the business to the buyer whilst acknowledging any weaknesses alongside solutions.
- Generates competitive tension with the buyer as it presents rationale reasons why it would be a strong asset to different types of buyers.
- Increases the value of the business by demonstrating specific synergies for individual buyers
- Brings the workload forward so the shareholders are not distracted from driving the business later in the programme when the negotiations are underway.
The marketing campaign
Because the prosthetics market is so unique and small in nature, Polestar worked with the client to curate a very specific buyers list and unobtrusive process that would not hamper the business’ day-to-day running. A thorough marketing campaign was run, where the Polestar team reached out to potential buyers via phone, email, and LinkedIn. Using a strict confidentiality agreement, the IM was shared until bids were received.
Offers and negotiations
Polestar considers some key aspects when reviewing bids: the total valuation, but also how much cash is on the table vs. equity; possible earn-outs; how much equity staff will have to roll over; and the buyers’ intentions for the business and their plans for its staff.
Because the shareholders wanted to retire, the total valuation and how much cash was on the table were the two most important factors when reviewing the offers for ProActive.
Matters to overcome
Polestar’s job is to carefully management matters that arise in a deal process. This ensures that the needs of all parties could be met when possible. For ProActive, this included:
- Providing modelling assistance to the client (the two shareholders were not trained financiers)
- Preparing the financial information for due diligence
- Helping analyse the net-working-capital position of the business.
Completion
After negotiations with interested parties, ProActive decided to move forward with Ability Matters Group, backed by G Square Healthcare Private Equity LLP.
Ability Matters Group was the perfect fit for ProActive, enjoying a reputation as the #1 provider of prosthetics and orthotics services in the UK and Ireland, serving 235,000 patients annually. Ability Matters employs 100+ technicians across its 6 manufacturing sites, producing the 100,000 devices prescribed each year by 150+ clinicians at 64 clinics throughout the UK and Ireland.
The group provided the “mom and pop” clinic and its staff a chance to develop and grow as a part of a larger business. Although the products and services provided by ProActive were complementary to Ability Matters, most importantly, Ability Matters gave the shareholders the valuation and cash to retire from their business.
A spokesperson for ProActive Prosthetics commented:
“Whilst ProActive will continue to provide the same individual, professional and caring services we have built our reputation on, we are excited for the opportunities that Ability Matters Group offer by providing access to their cutting-edge technologies and supporting the continued development of our services.”