PRIVATE EQUITY | NAVIGATE
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PRIVATE EQUITY | NAVIGATE 8 PRIVAT EQUITY | NAVIGATE
CASE STUDY WHY BDO VERITON PHARMA (“VERITON”)
BUILDING THE BUSINESS PLAN
Producing a compelling business plan to immediately grab and retain the attention of a potential investor is a critical element of a successful PE deal.
WILL YOUR FINANCIAL FORECASTS STAND UP TO SCRUTINY? The assumptions driving your forecasts must be realistic and backed up with historic data. These forecasts must make sense in terms of the growth rate of the overall market and your competitors. Also ensure you have built in enough costs to support the top line growth. IS THE BUSINESSWELL MANAGED? Prove this with high quality financial information such as monthly management accounts and accurate cash flow forecasting. Also highlight the operational key performance indicators (KPIs) that are used to manage areas such as the sales pipeline and service delivery.
show they have the relevant experience to grow the business. Also be clear on where gaps in the team might exist and how you intend to fill them. ARE YOU ABLE TO RECRUIT AND RETAIN HIGH QUALITY STAFF? Point to a track record of employing talented staff that remain with the business for a considerable time. Talk about the incentive schemes used to achieve this such as bonuses and share options. ARE THE CUSTOMER ECONOMICS PROFITABLE? Prove that the lifetime value (LTV) of a customer is far greater than the cost of acquisition (CAC). Another factor is to show that once you win a customer the majority stay for a long term. Illustrate this with details of the annual customer churn rate.
BDO advised the shareholders of Veriton on the sale to SERB, a European specialty pharma business backed by Charterhouse Capital Partners. BDO supported the shareholders and management team throughout the sale process including: X Working closely with management to prepare the business for sale including preparing the IM and teaser and establishing the messaging on the company’s growth strategy X Assisting with preparing a detailed financial forecast model to present Veriton’s ambitious growth strategy and product pipeline X Identifying potential buyers, both PE and trade, and undertaking early discussions to gauge interest, as well as managing the discussions, management presentations and DD process with interested parties X Providing financial, tax and commercial vendor due diligence to help Veriton prepare its approach to potential buyers and make the process more efficient X Providing SPA and deal negotiation support, working closely with Veriton’s legal team, in order to reach a successful completion. Veriton is an established pharmaceutical company led by a highly experienced management team, with a vision to deliver both unlicensed and licensed medicines for paediatric and adult patients with unmet clinical needs. Headquartered in Surrey, Veriton employs around 40 people in the UK, Dubai and Australia serving the EEA, MEA and APAC regions respectively.
Right from the start of the process, the BDO team were keen to understand the details of our business and very quickly got to grips with the key value drivers. They had the expertise that was required to support the project across all the relevant disciplines and the project delivery was very well managed and coordinated. The BDO team were enthusiastic throughout and were extremely tenacious in making sure they understood our strategic plans and aspirations which was critical when the business backdrop changed (due to Brexit and COVID-19). I enjoyed working with the BDO team and despite this turbulent landscape, they helped us achieve an excellent result to the delight of myself and the shareholders. STEPHEN JONES Group CEO, Veriton Pharma ”
To help you create such a plan, here the key questions that you must answer in the narrative:
DO YOU OPERATE IN AN ATTRACTIVE MARKET?
Confirm the size of the market for your products and services (known as the Total Addressable Market or TAM). Also give comfort that the market will continue to grow. CAN YOU TAKE MARKET SHARE? Describe the competitive advantage of your products and services. Also go further by explaining how you will maintain this competitive advantage in the future. CAN THE MANAGEMENT TEAM DELIVER A GROWTH STRATEGY? The background of the team should
It is important that any business plan is clear, balanced and well thought through. It is the ‘story’ that supports your forecast numbers.
DOES THE BUSINESS HAVE HIGH QUALITY REVENUE?
Breakdown your revenue between the following categories: contracted; repeatable; and one off. The more revenue you have in the first two categories the more interested an investor will be.
PAUL MORRIS Head of Growth Advisory
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