Written by Matt Dixon for CCD Partners

CCD Partners is pleased to announce the investment by Synova Capital in Charnwood Molecular, an award-winning CRO serving the pharmaceutical, biotechnology, and chemical industries.

The deal provides Charnwood with capital to support and accelerate the continued growth and development of the business.

Charnwood is one of the UK’s leading providers of outsourced drug discovery services, supporting an international client base of pharmaceutical and biotech companies in developing novel drugs.

Originating from Loughborough University, the company has expanded into premises within BioCity, Nottingham, and delivers services across medicinal chemistry, process research & chemical development and custom synthesis.

Synovainvests in UK growth opportunities with a particular focus on companies valued between £20m and £100m. Key verticals include Healthcare & Education, Technology, Business Services and Financial Services.

Announcing the investment, Charnwood’s CEO and founder, Steve Allin, stated: “We are extremely excited about what we can achieve in partnership with Synova. Synova supported our business over an extended period prior to their investment, helping us to develop a strategic plan that we are all committed to delivering. They were able to leverage their sector expertise and introduced the business to a number of leading industry figures who will help us to grow going forwards. With Synova’s support we now have the resources to accelerate growth of our core service offering and to develop further specialist services to support our clients to develop innovative new treatments.”

Partner and Head of Healthcare for Synova, Tim Ashlin, added: “Having tracked Charnwood’s progress for a number of years, we are delighted to announce this investment to fuel Charnwood’s ambitious growth plans. It’s exciting to be supporting a business that is focused on developing the next generation of cutting-edge pharmaceuticals, and to support the continued growth of the UK life sciences industry.”

The CCD team was engaged to plan and execute a transition of ownership that would secure the future success of Charnwood.

We worked closely with the founders to assess all strategic options, build targeted business plans, and select and structure the transaction.

Steve Allin, founder and CEO of Charnwood, commented: 

“CCD Partners provided Charnwood with excellent strategic advice and planning which ultimately led to a successful major investment into the business by Synova Capital. During a lengthy and highly technical process, CCD partners worked hard to identify and capture potential strategic value for the founders, and were able to protect that value during negotiations.

Importantly, the efforts put in by CCD Partners enabled us to continue to focus our own efforts on the day to day growth of our business during the process. It is our belief that we would not have achieved the final value withoutthe close support of CCDPartners.” 

Phil Page, founder of Charnwood, commented: 

“We are delighted with the deal and with the CCD Partners team. We’ve achieved our original goal of planning a sensible transition for the founders, and, as part of CCD’s process, we have also developed a future investment and growth strategy well beyond our original expectations.

Charnwood now has highly invested and experienced figures at the helm and is set for a very bright future. The CCD team was instrumental in realising this potential for us and, for anyone considering a similar transition process, I cannot recommend them enough.”

Written by CCD Partners

There is a reasonably common view amongst business owners that one should wait to be approached by a ‘really keen strategic buyer’ before engaging in sale discussions. The reasoning being that if the buyer approaches first this gives the seller the upper hand in negotiations and means there is a good chance of a buyer being interested.

This, on its own, is wrong and, rather counter-intuitively, gives away the upper hand and can lead to sellers trapped into below-market deals or no deal at all after months of hard work.

I previously wrote an article on what to do if you are approached by a ‘really keen strategic buyer’which looked into how sellers can give themselves the best chance in such a scenario. The thrust of this article is that sellers in this situation are starting on the back foot and must work hard to catch up and be lucky enough to be dealing with a counterparty that is both highly motivated and unusually honourable.

Rather than relying on such a buyer-led approach, I typically recommend a seller-led approach. Using the methods I outline below I have enjoyed 100% success in securing above-market sales over my last 4 years and 7 deals (ever since I started employing these methods in their current form).

At the most basic level, securing a high price for a business requires a) the buyer to believe it is worth a high price, b) the buyer to believe they have to pay a high price, and c) nothing to go wrong before completion.

So, to achieve each of these, the core objectives of any seller-led sale process should be:

Objectives

• Maximise the perceived value of the business to buyers “Value Perception”
• Maximise the negotiation power of the sellers “Negotiation Power”
• Maximise the certainty that the deal will complete “Deal Certainty”

Every business is unique, and every sale process should be tailored accordingly, but it is possible to talk in general about the following core workflows:

Workflows

1. Narrative Development
2. Preparation and Presentation
3. Process Design

Taking each in turn…

1. Narrative Development

As I explore in my article “The most important thing to do when selling a chemicals or life sciences company” , developing a single compelling transaction narrative is critical to value. Such a narrative needs to inspire excitement in buyers, pull together all the strands of the deal in an understandable way, and build the platform for negotiations.

The narrative is the backbone of any process and is critical to get right.

Specific examples of what the narrative must do include:

• Value Perception – ensure buyers are convinced of the strategic potential to them
• Negotiation Power – ensure buyers believe there are credible alternatives to their offer
• Deal Certainty – ensure the business appeals to a good number of buyers

2. Preparation and Presentation

Selling (and buying) a business is highly complex with hundreds of variables that each impact the final value. How the data is analysed, how it is presented, and how it is incorporated into any deal are all decisions that need to be made at various stages throughout the process. Furthermore, the sale of a company is not just about the business being sold – it is also about how that business might fit and interact with potential buyers’ businesses, which can often be in less-familiar markets.

As I discuss in my articles “When is analytical commercial due diligence not enough” and “How are privately-owned chemicals and life sciences companies valued” , a thorough grasp of accounting, transaction structuring, company valuation, and a techno-commercial understanding of multiple interacting dynamic markets is all simultaneously required to optimally prepare and present a chemical company for sale.

Specific examples of preparation and presentation required include:

• Value Perception – ensure that sellers identify and present the full potential value of their business to all buyers (even those in less-familiar markets)
• Negotiation Power – ensure all the key details are known and understood when headline deal terms are agreed
• Deal Certainty – minimise the chance nasty surprises (internal or external) are revealed during due diligence

3. Process Design

A key aspect of a seller-led process is that the sellers can design and time the process to suit them. In a seller-led process it is much easier to design a timetable of work that focuses negotiation power during the short windows during which the key terms of a potential deal are agreed, that leaves sufficient time to prepare and execute with potential buyers, and that coincides with favourable seasonal conditions associated with the seller’s business (e.g. accounts preparation, typically strong sales months, and others).

Additionally, as I discuss further in my article “Selling your chemicals or life sciences business: why a slow process can erode value, and how to avoid it” , a slow process can kill a deal and so must be avoided through good process design.

Specific examples of what the process must do include:

• Value Perception – ensure the business is perceived as a ‘prize asset’ being sold through a highly professional tailored process
• Negotiation Power – ensure the factors that maximise negotiation power are focused to apply during the periods in which deal terms are agreed
• Deal Certainty – minimise the time the business is “on the market” (when it is vulnerable to otherwise uncontrollable external factors)

It is possible to sell a lower-mid market privately-owned chemicals or life sciences business at above-market values.

However, to do it reliably, requires all of the following:

1. a full range of transaction skills and techno-commercial insight into adjacent niche markets,
2. a specialist and wide-reaching network of potential buyers and investors, but most of all
3. a pro-active seller-led approach and highly dedicated work ethic that is focused on delivering the three core objectives of Value Perception, Negotiation Power, and Deal Certainty.

I have not seen it work any other way. Yes, it can help if a seller is approached before or during such a process and there are success stories from buyer-led deals, but these are comparatively rare and the failures (that are typically not made public) are far more numerous.

If you are interested in reading more on this topic I recommend “How much should you pay an M&A advisor to sell your chemicals or life sciences business?” , which sets out more on the different styles of approach to company sales and the associated success rates.