Partnership, through two different lenses

In September 2017, Phoenix invested in Sygnature Discovery alongside founding CEO Simon Hirst and his management team. To mark the first anniversary of the investment, we asked Simon and Kevin Keck, Partner at Phoenix, to give their individual accounts of the working relationship between a private equity investor and a founding CEO.

Simon says:

Sygnature works with some of the world’s leading pharmaceutical and biotech companies, helping them with their early stage drug discovery research. It’s the kind of activity that big pharma has been outsourcing increasingly for several years. That trend has helped us grow from a handful of people when I set the business up in 2004 to more than 275 staff today, the majority of whom are PhD scientists.

For the first 13 years our business was entirely owned by management and staff, and our growth had been achieved without any external funding. When we started to think about accelerating our growth, including by acquisition, it was something we didn’t feel comfortable doing on our own – we didn’t have the experience. This was when we first started to consider bringing in a partner.

When we were choosing a potential backer, we wanted to look beyond the capital they would bring and think about what made them stand out. Phoenix had worked hard to get to know our sector and our business and we felt like the team there understood us. They had also completed lots of acquisitions for their portfolio companies and they helped us understand that successfully integrating an acquisition was as important as making the investment.

Phoenix were instrumental in helping us to complete our first acquisition earlier this year. Bringing Phoenix on board has brought about other positive changes too. Historically, if we had a decision to make, the four directors would get together, discuss it and get on with it. There’s definitely more structure around decision-making now - our main concern was that things would be mired in bureaucracy, but that hasn’t been the case. It’s been good to have someone who can reflect on your business and help create value.

I often speak to Kevin, although there’s no pattern to it. He is a useful sounding board. During the acquisition, and through the integration, we spoke several times a week. But he’s not chasing us, not calling up when there’s no need.

You never know in advance what it will be like to work with a private equity firm. We did a lot of reference-checking on Phoenix – we spoke to four or five other CEOs they had worked with about what they are like, particularly when things go wrong. The message came back that they are very supportive, even during the tougher times. Fortunately, things have been going well for us so far.

Kevin says:

At Phoenix we think carefully about where we want to invest, and we’d identified pharma services and, in particular, drug discovery services, as an attractive area for investment because of its long-term growth potential. Our interest was driven by trends such as the ageing population and the accompanying demand for new medicines, as well as the growing propensity for drug companies to outsource this work. We researched various companies in the sector and identified Sygnature as the stand-out company and management team. Sygnature was growing quickly and had an excellent reputation - Simon and his team had done a tremendous job since founding the business in 2004.

One thing that led to us being chosen as Simon’s preferred partner was that we had done our homework on how the business could grow. As well as getting to know Sygnature, we spent a lot of time talking to other companies in the space, so we knew what was possible in terms of Sygnature’s growth prospects.

There is often a lot of talk at the start of a new investment about 100-day plans, and so on. When we invested, the Phoenix team sat down with Simon and his team to agree a few key objectives that we would aim to achieve within the first year of working together. One of our objectives was to complete an acquisition in a complementary service area, so we were delighted to achieve this. Others included appointing a new Chairman, which we have since accomplished.

Before we invested in Sygnature, Simon, understandably, had lots of questions. The subject he asked us about most was how the relationship between him, his team and Phoenix would work in practice. How often would we speak? And on what? It’s something we hear a lot from the management teams we talk to.

In practice, the working relationship with our management teams is driven by what’s going on and the priorities of the business. There’s usually a good reason for us to speak; in Sygnature’s case, it had been to help the team bed in the acquisition or work on the Chairman appointment. We tend to focus on the bigger things rather than get mired in detail.

Now we’re all focused on the next stage of growth and how we're going to achieve it. For example, we're working on building out the company’s presence in the US, which represents a significant opportunity. The challenge will be to stay focused – there are so many potential growth avenues. The important thing is that we're all aligned on our key objectives. And I think we’ve established a good working relationship to enable these to become reality.