The management buyout of Newcastle based Quantum Specials is noteworthy in that a deal of such proportions has been successfully negotiated in a recession hit economy and is significant for the North East as it will ensure a company in an important high-tech growth sector, that employs around 150 people, remains in the region.
The buyout included funding of £32.5m from Lloyds Development Capital and Yorkshire Bank together with continuing management investment and a level of vendor consideration being re-invested.
Muckle LLP received notification that a deal was developing late on Christmas Eve. The deadline for transaction was 31 January and the teams involved worked solidly to successfully finalise what will probably be one of the region’s largest transactions of the year, in the early hours of 30 January.
Quantum Specials is a medicine manufacturing and production business which supplies bespoke products to pharmacies and general practitioners. The company provides high quality special medicines that specifically meet the individual needs of practitioners and patients throughout the UK. They recognise the need to produce a wide range of products which are tailor made using modern pharmaceutical manufacturing processes.
Established by founders Andy Patterson , Ian Edge , Alison Norman and Phil Richardson (together with support from key customer Phoenix Limited), Quantum Specials has grown from strength to strength in recent years and there is a high demand for its medicines.
Ian Edge, managing director of Quantum Specials, said: “There is significant growth potential in Quantum Specials and we were determined to affect a management buyout in order to ensure this exciting business remains and grows in the North East of England. Our staff total has doubled over the last year to 150 and we expect that figure to reach approximately 175 by the end of this year.”
KPMG’s North East corporate finance team identified and marketed the business to potential financial buyers, the transaction ultimately being funded with venture capital from Lloyds Development Capital in Leeds and Yorkshire Bank in Leeds.
The KPMG corporate finance advice was led out of Newcastle by Rod Wilkinson and David Stevens, who advised the shareholders. David Stevens, KPMG LLP said, “The high quality of the business generated strong investor and banking interest and we are delighted to have advised on another private equity deal in a difficult market. This deal does show that transactions can be successfully concluded and that funding is available if businesses are prepared and brought to market carefully.”
The key Quantum Specials management team of Ian Edge and Alison Norman were joined by Andrew Scaife, who affected a management buyout. The management was advised by the Muckle LLP corporate team including employment partner Chris Maddock.
Muckle LLP partner Robert Phillips said: This really is a fantastic transaction to have worked on. In the current market place it is genuinely difficult to get substantial deals like this funded and away. All of the professionals on this team have worked hard to make the transaction happen. KPMG did a great job of marketing the business to potential investors. Ian Edge, Alison Norman and Andy Scaife have acquired a fantastic business. One which appears to be recession proof.”
Muckle LLP associate Craig Swinhoe added: “This deal was pulled together in a short space of time and was characterised by genuine goodwill on all sides to make it happen. This really does appear to be one of those transactions where there is a win-win for all concerned. It illustrates that there is still the potential for investment in the current climate and that the North East is equipped with the expertise and innovation to benefit from the development of quality hi-tech markets.”
Alison Norman, the technical director of Quantum Specials added: “Muckle was chosen to represent our management team because they are a well established and prestigious firm that delivers results. Our new finance director Andy Scaife had worked closely with Muckle during his time at KPMG and knew that they would make sure the deal got done. Muckle’s lawyers ensured that the process was smooth and I was impressed with their ability to translate the technical aspects of the deal into language that we could readily understand. As a pharmacist I was unfamiliar with the procedure that was undertaken so their helpful and straightforward guidance was essential.”
Andy Scaife, the new financial director of Quantum Specials, commented: “All of the firms involved in this transaction were excellent. Muckle was exemplary throughout the whole process and provided excellent advice to our management team. Everyone involved in this deal worked hard to ensure its effective conclusion. Having enjoyed a highly successful period with KPMG in Newcastle I am now delighted to join the board at Quantum Specials and look forward to assisting the company in its exciting development plans.”
David Stevens who takes over from Andy Scaife, to lead the KPMG Newcastle office CF team added “We wish Andy all the very best in his new role and he joins a business that has very strong fundamentals and an exciting future. The Quantum Specials transaction represents another highly successful deal for the KPMG Newcastle Corporate Finance team which we will look to build on and continue to go from strength to strength.”
Muckle LLP Deals
Muckle LLP has been involved in a number of deals since December 2008 including the sale of Goldshield Electronic Security Limited, the acquisition of The Officers Club by TimeC 1215, the acquisition out of administrative receivership of Villa Soft Drinks by Villa Drinks Property Limited, an investment in Medalytix Limited by Hotspur Capital Partners Limited jointly with Corporacion Empresarial ONCE SA, Liverpool Seed Fund and RisingStars Growth Fund, a further investment into The Tanfield Food Company Limited and two major undisclosed multi-million pound refinancings for North East based companies. All this demonstrates that despite the recession there are still opportunities for North East businesses to thrive and develop.