Case Study: Vernacare
International and acquisitive expansion for healthcare group – Vernacare is the world’s largest producer of single-use toileting and cleansing products.
Leading innovation – Vernacare can trace its roots back to 1961 when Vernon & Co. began to develop disposable hospital products in Bolton. As inventors of the single-use system for patient toileting and cleansing, the award-winning company has created a global presence in Europe, Africa, Asia, North and South America and Australia. In October 2015, we invested £17.7m for a 70% equity stake in Vernacare to back its ambitious international expansion strategy to extend its global reach to more than 50 countries.
The accelerated growth strategy would be achieved by increasing sales in established territories and gaining a foothold in new markets that were opening following regulatory change. In addition, the business was keen to undertake strategic acquisitions to broaden Vernacare’s product range and geographical footprint.
We were highly impressed by the quality of the management team and their focus on developing the product range and driving overseas expansion. The buyout saw Palatine Partners Ed Fazakerley and Andy Lees join the Board as non-executive directors.
Going for growth with added value
Management development – Palatine appointed John Samuel, who has extensive healthcare experience and has proved to be a valuable sounding board for the management team, as chairman. In addition, we have broadened the board composition by appointing an Operations Director to focus on maximising operational opportunities and efficiencies.
Strategic M&A – In November 2017, Vernacare acquired Synergy Health Healthcare Consumable Solutions (HCS), a Chorley-based manufacturer of single-use medical supplies, from STERIS plc. We introduced and led the acquisition and assisted management pre and post acquisition in preparing a detailed integration plan. This included identifying and implementing operational synergies and site consolidation opportunities. HCS has since delivered annualised synergies of circa £1.8m.
Global reach – We have supported the expansion of Vernacare’s distributor base in Europe, South East Asia, the Middle East and South America. International sales have increased from £12m to £20m over three years, accounting for circa 40 per cent of group turnover. The acquisition of Synergy has also allowed us to market its product range to Vernacare’s overseas customer base.
ESG – Management embraced our commitment to driving profitable growth with responsible growth. Integrating Environmental, Social and Governance (ESG) factors has led to the Board developing a robust sustainability strategy. An example of mobilising greener practices includes implementing efficiency initiatives in the manufacture of the single-use macerator system, producing 60 per cent less water than reusable alternatives and up to 96 per cent less energy.
The results – We exited the business in 2020 in a sale to H.I.G Capital. Since our investment, acquisition synergies and operational improvements have delivered £3m of cost savings. EBITDA has grown from circa £5.2m at the time of investment to a run rate of circa £10m, while turnover has increased from £29m to £63m.