This is an interesting case study in that almost all our services were used. In fact, the only service not used, thankfully, was in respect of turnaround!
Adgen was part of COSAR, the commercialisation arm of the Scottish Agricultural College (SAC). Its principal business was designing and selling proprietary and third party food safety diagnostic test kits for a variety of purposes on a worldwide basis. For example, it sold kits which could test for plant disease in diverse areas (grapes for the wine industry, potatoes, tulips) and also in food processing (including whether prawns were fully cooked before being packaged and e-coli in meat processing).
When we were introduced to the business it was still very small but had got to a stage where it needed further funding and focus to transform it into a commercial and profitable enterprise. However, several challenges faced Adgen and SAC:
- the spin out was being led by two academics whose only previous business experience was Adgen (within the relative safety of SAC)
- the spin out experience was relatively new to SAC
- the ability to frame the proposition for investors was weak.
This made the process of fund raising quite protracted, and it took almost a year from starting to work with Adgen to completing the spin out. However, we supplemented the expertise of the existing team in areas such as writing the business plan, fund raising and spin-out to help them achieve a great result. In summary, the two academics retained shareholding control, investment was secured from 3i and SDF (now SEP) and SAC also maintained a meaningful stake in the business.
Now the hard work began!
Two things were essential:
- firstly, the business needed to have appropriate in house administration and accounting systems to operate effectively and to generate food management information – in this regard, the business was like a complete start up
- secondly, we needed to implement regular and effective director and management meetings to instigate the discipline of reviewing performance against plan, assessing opportunities, setting strategy and establishing governance for the stakeholders.
We supported Adgen with both of these; the first, by providing a 2 day a month ‘quasi-FD’ type role to pull together the accounts and prepare the board pack, and the second, by chairing the board meetings as well as developing a process to assess new opportunities.
There appeared to be countless opportunities for growth, and the company was receiving many diverse enquiries regarding developing possible tests for varying food related problems. As a new management team, there was an understandable desire to respond to all of these enquiries in a positive way. However, it quickly became apparent that the team had to have some system to filter these opportunities so that the company could pursue those which would enhance long term profitability, cash and shareholder value.
We spent time with the team developing a matrix to assess new opportunities. This matrix covered such matters as the:
- scale of the opportunity
- complexity of the test
- time it would take to develop
- the cost
- intellectual property rights
- routes to market
- existing tests in the marketplace.
All new opportunities needed to be assessed in these terms, and, therefore, some of the more spurious (albeit interesting) opportunities were quickly discounted. The team quickly got the gist of this, and it made board meetings much more structured and effective.
The business prospered almost from Day 1. Much of its initial business was distributing other companies’ products in the UK and further afield. Whilst helpful for initial cash flow, we considered it strategically important to reduce the company’s reliance on this and develop its own tests and intellectual property. It successfully managed this through partnerships with European Universities. At the time of its eventual sale, it had managed to increase business in this area to be profitable in its own right, and this certainly enhanced its final sale value.
The company was ultimately sold to Neogen Inc, a US listed business, and the business rebranded. After the sale, our relationship continued for some time providing the monthly management reports to the US. We also assisted in defining the scope for the financial controller who was eventually hired.
The business has continued to grow in Scotland, and is now the European HQ for Neogen. The original shareholding management team is still there and run the European business from Scotland with operating companies across Europe.
Craig Corporate were involved with Adgen over a 7 year period which included:
- helping write the original business plan
- fund-raising
- spin-out negotiations
- setting up the financial and reporting systems for the new company when it was spun-out
- being appointed non-executive chairman by the institutional investors
- negotiating the ultimate sale to Neogen, a US listed food safety testing business
- providing tax advice on the disposal.
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