Springfield Healthcare opens supported living home in Hartlepool
Care provider Springfield Healthcare has opened a new £800,000 supported living development in Hartlepool, a unique concept designed to enable young adults with learning difficulties to live independently in the community.
The ‘Pathways to Independence, Independent Supported Living Scheme’ facility comprises five, two-bedroom apartments and a further single bedroom apartment, along with a ground floor drop-in centre with a TV area and kitchen facilities, and staff available 24-hours a day. Located close to shops and amenities, it provides a halfway step for young people, preparing them for living independently in the community. The property, the historic Co-operative building on Park Road, is Grade II listed.
The project was backed by growth capital provider, BGF (Business Growth Fund). The funding follows BGF’s initial injection of £4.4 million into two businesses within the Springfield Healthcare Group in 2012: Springfield Homecare and Seacroft Care Village.
BGF is the UK’s leading independent investor of growth capital in UK smaller and medium sized businesses, and is backed by five of the UK’s main banking groups. The company provides long-term equity investment in return for a minority equity stake.
Springfield Healthcare Group, was founded in 1967 and today is one of the largest independent providers of domiciliary care in Yorkshire and Humberside. The business, which began as a specialist provider of dementia care, has expanded in recent years to provide general homecare and training for other care providers. Springfield has also pioneered the care village model. This saw the company open Seacroft, a £5 million development in Leeds last year. Across the Group, Springfield now employs 1,200 staff and provides care to 2,500 people each day.
Graeme Lee, CEO of Springfield Healthcare Group, said: “Our ethos is to keep people living at home independently for as long as possible. The facility offers disabled young adults the freedom to choose their path, while benefiting from comprehensive, market-leading care and support. These young people now have the opportunity to live independently within the community, with their families reassured by the 24/7 care and support that they will receive.
He continued: “Springfield Healthcare has seen exceptional growth during the past two years, and the support that we have received from BGF, both financially and strategically, has contributed significantly. We look forward to the further growth of the business during the coming months, continuing to provide the very best care to our clients.”
Andy Gregory, Regional Director at Business Growth Fund (BGF), said: “Springfield Healthcare continues to lead the market, providing the highest quality care in exceptional facilities. BGF is pleased to have been able to assist the business in delivering its latest facility, and look forward to working with Springfield Healthcare as it continues to expand both its properties and service provision.”
Richard Hunt and Jeremy Thompson of Squire Patton Boggs acted as legal advisers to BGF on its investment in Springfield Healthcare.
Richard joined BGF in July 2012 and is based in Leeds. His main role is to identify and successfully execute investments for the fund. He also sits on the board of a number of our portfolio companies.
Richard has 16 years’ experience in small company investing with previous roles at YFM, Octopus Private Equity and Sovereign Capital. He began his career at Deloitte where he qualified as a Chartered Accountant following three years at York University where he studied Economics and Economic History.
He is married with three children and lives in Leeds. At weekends Richard runs a free taxi service for his children around which he fits in time to play, watch and coach the beautiful game that is football.
Latest investments/Board positions:
- Total Recycling Services (Board Observer)
- Altec Engineering
- Cussins (Board Director)
- J&B Recycling (Board Director)
- Moda in Pelle (Board Director)
- Springfield Healthcare Group (Board Director)
- York Mailing (Board Director)
- Xercise4Less (Board Director)
- VTL Group
Neil joined BGF in November 2011 as an Investor based in Manchester. In this role, Neil is involved in all aspects of the investment process from origination through to completion, and supports companies throughout the investment hold period.
Neil has gained private equity experience at ANZ Private Equity in Sydney and latterly with Infinity PE in the North West, where he was involved in executing and managing a number of investments across a range of sectors.
He began his career at PWC and worked in both the Manchester and Sydney offices in the Transaction Services division. Neil is a qualified Chartered Accountant and holds a BA (Hons) in Economics from the University of Sheffield.
Latest investments/Board positions:
- Grace Cole (Board Director)
- Hobs Reprographics (Board Director)
- Nationwide Window Cleaning (Board Director)
- Medicina (Board Observer)
- Barburrito (Board Observer)
- Springfield Healthcare Group
- Boost Juice Bars (Board Observer)
- Horbury Group (Board Director)
- Broadband Satellite Services
- Kids Planet (Board Director)
- High Access Maintenance (Board Director)
Regional Director – North, Scotland & Northern Ireland
Andy is a member of the BGF Investment Committee and leads our investment team in the North of England, Scotland and Northern Ireland, identifying and executing investments for the Fund. He sits on the board of some of BGF’s investee companies. Andy has significant experience of regional private equity, having worked as a director in the Manchester offices of ISIS Equity Partners, Bridgepoint, and Royal Bank Development Capital.
Most recently Andy was a key member of leading investment firm Key Capital Partners, based in Manchester. He is a chartered accountant with 17 years’ experience in private equity, acquisition finance and corporate finance.
He also has industry experience, having been group finance director of Pennine Retail Systems Limited, a leading UK retail software company which was successfully backed by private equity.
Andy is married with two young children and lives in Cheshire. In his limited leisure he tries, and generally fails, to impress his children by playing the piano and whilst on holiday loves to windsurf or snowboard depending on the time of year.
“I joined BGF to establish our business in the North, having been hugely excited by the prospect of helping to build a business from scratch and bring a new type funding solution to growing companies. I continue to gain huge satisfaction from working with ambitious entrepreneurs and helping them to accelerate the growth of their businesses.”
- Moda in Pelle
- Nationwide Window Cleaning
- Boost Juice Bars
- Springfield Healthcare Group
- Better Bathrooms
FUNDING STRATEGIC ACQUISITIONS
For businesses determined to grow quickly, a strategic acquisition can be the transformative moment in their evolution. But buying another company requires both deep pockets and the skill and experience to integrate two organisations in a way that realises their combined potential. Many growing companies have the ambition to expand this way, but lack the means to do it.
By the beginning of 2012, Anthony Foy, the chief executive of SkyDox, a business offering secure file sharing facilities that use cloud technology, was facing exactly this dilemma. “We were a small and innovative company that was a leader in its field, but we were growing in incremental steps, mostly thanks to business angel investors,” Foy explains. “We came to the conclusion that making an acquisition would enable us to realise our ambitions more quickly.” He identified Workshare, a US company with a very complementary document management business, as the perfect target. The question was how to finance the deal.
“It was a slightly unusual transaction because we were hoping to buy a company that was both older and bigger than us,” Foy says. Securing sufficient debt from risk-averse banks was out of the question and equity investors were wary too. “We did pitch to several private equity companies, but I wouldn’t say imagination is a particular hallmark of that industry,” Foy recalls. The solution proved to be an injection of growth capital from BGF.
In September 2012, it invested £7.25m in SkyDox, with Scottish Equity Partners also participating in the financing. The acquisition of Workshare was completed a few weeks later. “Raising money is never easy – it’s a painful and humbling process and you have to really believe in what you’re doing,” says Foy. “We chose BGF because they had the intellectual capacity to see beyond the immediate risk of the deal to the longer term potential of bringing these companies together – they had the capital we needed to grow, but they also offered a partnership where our interests were aligned.”
Nevertheless, Foy says he thought hard about whether he had the drive to make the deal work. “The pain is something you put up with in order to realise your ambition,” he says. “Not everyone desires that and part of this process is deciding whether you really want to go for that growth, or whether you prefer to run a lifestyle business.”
That’s a familiar refrain for Chris Hodges, an investor in BGF’s London office. “Our single-biggest competitor is the ‘do nothing’ approach,” he says. “The reality is that it’s tough out there and ambition is a crucial ingredient of business success.” This is one reason, why, says Hodges, the quality and attitude of the management team are priority considerations when he is mulling an investment in a business. “I need to get a sense they’re open to the bigger picture, to really strategic thinking,” Hodges adds. “We only take minority stakes, but equity dilution can be an emotional thing, so we need managers who recognise that growth capital can really turbo-charge their business.”
For those managements that meet these tests, an equity investment – especially from BGF – is the ideal way to finance an acquisition, he argues. “Equity capital is far less restrictive than bank debt, where the borrower is subsequently required to perform to very tightly defined criteria where failure may mean losing control of the business.”
Mervyn Williamson, the joint managing director of business travel management specialist Statesman Travel, points to another advantage of growth capital he says was crucial when his business was considering fund-raising options. “Bank debt wasn’t going to be practical – the problem we pose for the banks is that we’re not an asset-backed business so there’s no security for a lender – because our model depends entirely on earnings,” he says.
“But even if we had been able to borrow the money to do the deal we wanted to do, we wouldn’t have gone down that route because we were also looking for additional expertise at the boardroom table, ideally from someone outside the business travel sector who would bring a different mindset to our company.”
Like SkyDox, Statesman was also on the acquisition trail. “My partner and I had bought Statesman in 2007 and we grew it from £28m of annual revenues to £50m three years later,” he says. “But we needed to be bigger than we were in the eyes of some of the larger potential clients, who felt uncomfortable dealing with a company where they’d be a disproportionately large customer.”
That posed a chicken-and-egg problem, with larger clients unwilling to come on board until the business grew bigger while the business struggled to achieve that growth without the bigger clients. “We began looking for acquisition targets and having identified Commodore Travel, we had to think about how we would finance the deal,” Williamson adds.
Having decided growth capital was the best fit for his business, Williamson began talking to a number of interested private equity firms. But he didn’t want to give up control of the business and he was concerned about the “churn factor” in the industry. “Three years after they buy you, you can find yourselves sold to someone else who you may or may not like,” he complains.
Finally, Statesman was introduced to BGF by its banker, Lloyds Banking Group. In October 2011, the company became what was then only BGF’s second investment, accepting a £4.25m injection of funding, which was crucial in clinching the acquisition of Commodore. “We did think long and hard about bringing in a third party, but we’re happy to have ended up with a minority investor whose interests are aligned to our own,” Williamson says. “We also like being part of a portfolio family – we’ve been able to offer our services to some of the other companies in which BGF has subsequently invested and to source from those businesses at a competitive rate.”
A year-and-a-half later, Williamson says both the rationale for the acquisition and Statesman’s choice of funding solution are proving themselves. “The combination of our two companies has given us a great deal of additional credibility in the market place, boosted our procurement power and given us real strength in depth – we’ve totally raised our game,” he says. “We’re also continuing to invest, which costs money, but there’s going to be a return on that investment and we’ve had the support of BGF as we’ve made those commitments.”
All of which is music to the ears of BGF’s Chris Hodges. “More people need to recognise the attractions of growth capital,” he argues. “It became deeply unfashionable for a period, amid the first dot.com boom and the years of easy credit that followed, when leverage and debt were all the rage, but this really is an excellent way to develop a business.”
By James Hurley
“We haven’t got the ‘not invented here’ mindset,” says Richard North, founder of Midlands toy business Wow!Stuff. “Our attitude to innovation is ‘whoever, wherever’ – we don’t care who comes up with the idea, or where they are inthe world.”
Even on the side of a mountain in Vermont. This is no imaginary example – it’s the strange, isolated home of Jaimie Mantzel, an inventor that North is hoping will help him deliver a hit toy this Christmas.
Mantzel spent a decade flipping burgers, painstakingly saving up $22,000 to buy a remote piece of land that would be his escape from the rat race. Once he’d found a 20 acre plot on the side of a mountain, he designed and built an “off grid” three-storey dome structure from reclaimed materials to live in.
Deciding he wanted to build a workshop, he obtained a disused aircraft hanger and transported it up the mountain by foot, piece by piece and reassembled it. With a better way to carry materials to his new base clearly required, he started work on an off-road vehicle. Building a DIY 4×4 would be impressive enough, but Mantzel is a man who likes to put his imagination to work: he started creating a giant, 12 foot tall robotic spider from scrap aluminium that he could pilot.
Documenting his singular lifestyle and esoteric creations on a blog and, crucially, on YouTube brought Mantzel a global audience. The giant robot proved a particular source of fascination. One of those who followed Mantzel was a robot scientist working for Wow!Stuff and fascinated with the eccentric inventor, he told North.
As it turned out, Mantzel had already spotted the potential of toy versions of his giant arachnid – but had bad experiences with American toy giants. North and his team eventually convinced the reclusive creator that they could enjoy a fruitful relationship.
The result is Attacknid – a six-legged “battling machine” that North is convinced will be the number one boys’ toy this Christmas, with all of the UK’s major toy retailers having agreed to list it.
Wow!Stuff has a knack for coming up with toys that capture the imagination. Last Christmas, it sold 400,000 Air Swimmers, a giant inflatable radio controlled fish that ‘swims’ through the air. Another hit was My Keepon, an interactive robot that dances in time to music.
Its origin? YouTube again. Wow!Stuff workers spotted a video on the site starring a dancing robot designed by scientists to help therapists improve the social development of autistic children. When North watched the video, he saw the potential of the £20,000 device, which had been developed by US company BeatBots.
The lesson, North says, is that no amount of market research and analysis of trends can substitute simply recognising an inspired idea.
“You’ve got to back your hunches. Research won’t predict the next big thing. If you’re growing a business you can have a perception that all the ideas have to be generated internally. We’ve realised you have to look outside.”
The company – which has won a National Business Award for its approach to innovation – also uses the internet and social media to find new ideas and inventors, which North says can come from any industry and any location.
“You have to cast your net wide. The people we employ are people who share ideas freely and aren’t selfish – innovation has to be in everything we do, not just toys. There’s a world out there full of ideas, so it’s your job to capture that, not think, ‘we have all the ideas here’. It’s about being free and inclusive.”
If that makes the process of product development sound easy, North is at pains to point out that the pressure in his industry to innovate quickly and accurately can be “brutal”.
“When we started out I remember talking to people in the industry. Everyone had the same remark – it’s one of the hardest industries to do a start-up. Even the biggest toy companies, with millions to spend on development, research and focus groups say 50pc of their toys won’t work commercially. It’s like being a venture capitalist – you know a lot of what you do will fail. And the amount of start-up capital you have to invest upfront can kill you quickly if you get it wrong”.
With toys taking between two and three years to develop, the moment they’re presented to retailers is “nerve racking”, North says, with some understatement. He’s just back from toy fairs in the US and Hong Kong where he’s been doing just that. Unusually, all of the toys that Wow!Stuff presented received orders or interest.
“That never happens. It’s the best we’ve ever done. At the point of the first reveal, you’re hoping people get it. Sometimes you’ve just missed the trend, sometimes you’re too far ahead – predicting something that hasn’t arrived yet,” he says. “We saw a lot of companies doing toys that worked with mobile apps. They’re probably two years ahead of the consumer. Next year is when we think the timing will be right for that.”
When I tell North that the way he describes innovation makes his company sound like it is run by Tom Hanks’ character in the 1988 film Big, his response is telling: “I’ve never seen it but people keep saying that to me.”
In the film, a 12 year-old boy is granted his wish to be given an adult body. He gets a job in a toy firm and becomes an unwitting nemesis to an experienced product developer by rubbishing his ideas and coming up with much better ones of his own.
“The industry is like that – there are lots of clever people trying to justify their jobs by relying on research and numbers. The truth is, the answers are out there, not in you. The minute you start getting hierarchical is the time you lose your innovation. You need to think like a kid, be like a kid – before you were indoctrinated by life and educated in the supposed right and wrong ways of doing things.”
However there is no one single way to innovate; companies will invariably take different approaches to it as is evident within BGF’s own investment portfolio. The important common denominator is that innovation is high on the corporate agenda for them all.
At M Squared Lasers in Scotland, backed by BGF this year, thinking like a child is not on the agenda – they have to take a rather more structured approach to innovation. The company develops lasers for a huge array of industries, and for a wide range of applications – from advanced scientific research to sensing hydrocarbons in oil and gas production, sensing explosives and chemical warfare agents and computer chip manufacturing.
All of the industries that the company sells to demand both speed and accuracy – and constantly changing demands means M Squared needs to come up with new
products all the time.
“Our term is dependable innovation,” says the company’s chief executive, Dr Graeme Malcolm. “They’re novel processes but solving a real problem, so what we produce needs to be robust as well as quick. The customers don’t want flaky prototypes.”
In one sense, however, the approach M Squared takes to achieving that aim is strikingly similar to Richard North’s“whoever, wherever” philosophy. “We can sense chemical agents from hundreds of metres – that’s unique to us. What we’ve done to get that advantage is take a collaborative approach with supply chain partners and universities. Typically, our big publicly listed competitors take the ‘not invented here’ approach to life. We’re smaller and more agile, which gives us a bigger research and development group – because it’s not just us coming up with the ideas.”
Working with a multitude of partners is not a soft option, however. “You have to think harder about intellectual property this way,” Malcolm warns. Detailed agreements are made in advance so partners know where they stand on ownership if something commercially valuable is created. Working with academia as a small, fast growing company presents challenges of its own but Malcolm says it’s less of an issue than one might expect.
“We try to work with the most like-minded groups in universities – there are agile parts that are already working with industry. The rest, the more research-based academic parts, can be worked with for longer term projects,” he says. “We license a lot of technology from universities – that makes the relationship last longer because they’ll come back to you.”
For Malcolm, the hard part about innovation isn’t coming up with good ideas – it’s bringing them to market. “There’s often much more innovation involved in the process than in the original idea,” he says.
“Some of the things we’ve worked on have been groundbreaking. But 1,000 times more effort goes into rigorous engineering and developing a new market, and educating a new customer base. That’s the bit that’s underestimated – the light bulb moments can be obvious.”
To make sure innovative ideas quickly result in physical products, unlike many of its larger rivals, M Squared uses local manufacturing, via an advanced production facility in Glasgow. “The proximity between engineering and manufacturing is crucial when you’re doing it quickly. It’s an intimate process – and allows you to keep the skills you need to do the whole cycle from analysing a market to delivering a product. It’s difficult if you don’t have those close connections.”
Encouragingly, he thinks the principle could apply to less hi tech industries too – rising costs in emerging markets mean fashion companies increasingly see the speed and control benefits of coupling innovation with local manufacturing.
“I think that trend is something the UK is pulling through strongly on,” he says. “It makes the cycle of iteration much more rapid – so innovation can happen more rapidly. Many of the great innovations in recent years have had a number of iterations – the tighter the loop the better.”
But what about companies that aren’t involved in developing physical products? How do they approach innovation?
A care home isn’t something one immediately associates with innovation.
However, Graeme Lee, chairman of Springfield Healthcare Group, insists plenty of creativity has gone into turning a family business with sales of £400,000 into a £12m turnover company. He too is pioneering a new way of doing things in the domiciliary care market.
Unlike Wow!Stuff and M Squared Lasers, Lee’s innovation is focused on service and his business model rather than product design and production. Yet Lee’s emphasis of looking outside your own business for inspiration echoes the approaches of North and Malcolm.
In his role as chairman of a not for profit care association, he visited a multitude of care homes. A range of problems struck him – residents felt isolated in remote homes and frustrated by living on top of one another. “They wind each other up,” he says.
Worse, many have to cope with a change in circumstances – if a resident develops dementia, they’ll often have to move.
Lee’s solution is simple, but unconventional – a “care village” in the heart of a normal community just outside Leeds. Residents have separate units, and can move from complete independence to sophisticated care in one location. And they’re in the heart of real community life – the pub, the village shop, the post office.
“Say Mrs Smith comes in at 70 – we can deliver everything she needs for the next 25 years. Normally, if you’re in residential care and you get dementia you have to move. This is a home for life. And for us, we keep the patients longer so it’s a good business model, if we give people the right care at the right time.”
Echoing Malcolm’s point, for Lee, the hard part is in the delivery, not coming up with the original idea.
To bring the care village to life, Lee has had to convince both the NHS and local councils – hardly organisations known for embracing change – of the benefits of his approach. He’ll need their backing if he wants to expand the business, after all.
Just as North warns that bad timing can kill a good toy, Lee has picked a time of upheaval in the healthcare market to introduce a new model.
“GPs take control of healthcare budgets next year. They love what we are doing because they know that everything the patient needs is taken care of. For doctors, we’re ticking all the boxes.”
BGF liked the idea enough to invest and Lee is hoping to replicate it in other
When BGF backed North’s business, he says it focused the mind on what they were buying into – and ramped up the pressure to keep coming up with the bright ideas.
“As investors, their worry is, how do they know we’ve got the magic touch. You don’t know why it’s you that they’ve chosen; but then, why not us?”
The key to staying innovative for these growing companies is to keep looking outside their businesses for inspiration, hiring people who don’t care where the best ideas come from and remembering that being innovative doesn’t stop at simply coming up with neat product ideas. And of course, timing is everything.
WHAT IS INNOVATION?
If the Wall Street Journal is to be believed, innovation is the most overused word of 2012. It is often bandied about by consultants and PR executives, and companies can be just as guilty; heralding innovation when in truth what they have is simply a good product.
So what is real innovation? There are numerous definitions, and the experts can’t quite agree, but here are a few examples to consider:
- Inventing a product, technology or service that is genuinely new. Like the light bulb, wifi or Google.
- Revolutionising an existing product by changing the users’ behaviour while at the same time revolutionising the market. Apple’s iPhone anybody?
- Inventing a new process, delivery method or business model. Turning mainframe computers into personal ones or shifting video rental from stores, to post and then online.
- Creating a new market for a leftover or overlooked commodity, or extending a market for an existing product. Best Buy, the US electronics retailer is creating revenues from recycling so-called ‘e-waste’.
- One could always just go with the summary offered by the late Steve Jobs who knew a little about the subject: innovation is what “distinguishes between a leader and a follower”.