Fiona Pearson, the former CEO of laboratory software firm CliniSys, talks to Rachel Bridge at Drax about the benefits and challenges of having a PE investor on board
When Fiona Pearson applied for the job of running CliniSys she had a big stroke of luck.
At the start of the recruitment process CliniSys was a subsidiary of a large pathology business but by the time she was offered the role of Managing Director, it had been decided that the business would be spun off from its parent to become a standalone software business. She says: “It made for a rather strange interview process.”
CliniSys provides software solutions for laboratories and Fiona took on her new role with enthusiasm.
She says: “We had a win rate of more than 70%. It was a wonderful business in a great position, at the right time with the right product, with the right people in the business.”
CliniSys acquired a business in Europe which strengthened its position in the market and in 2006, four years after Fiona joined the business, the shareholders decided it was time to realise their investment. Fiona seized the opportunity and led a management buyout of the business, backed by private equity firm ECI.
It was a good partnership. She says: “ECI were fantastic from day one. I never felt that they were interfering or trying to run the business for me. Their advice was very pragmatic and helpful and I always felt that our goals were totally aligned. It was a very open, honest and great fun relationship.”
ECI also helped Fiona to win round some of the doubters within her own team. She says: “The staff in mainland Europe were very nervous about private equity, not helped by a couple of the senior management stirring it up and saying they were all going to be made redundant because private equity were just interested in cost-cutting. ECI talked to people and made them realise that their interests were about growing the business and not about taking cost out. That was hugely helpful.”
Fiona also appreciated the CFO and the Chair that ECI introduced to the business. She says: “It was great to have some real financial rigour, proper reporting and financial analysis, and to have numbers that enabled you to decide where you were with the business and what you were trying to do.”
ECI exited the business in 2013 to Montagu, which helped develop the business further through a buy and build strategy. Within a month of them coming on board CliniSys had three deals lined up.
Montagu successfully exited just two years later, selling the business to a US trade buyer, Roper. Fiona stayed on for two years to hand over the business and eventually left in 2017. In her time at the helm its turnover had risen from £2 million to £60 million and the number of employees grown from 40 to 440.
Having been through the PE investment cycle twice, Fiona says the one piece of advice she would give others considering taking on private equity investment is to find out more about the process than she did in advance.
She says: “One of things that I wished I had understood at the time of the first deal was how sweet equity, loans and leverage, worked. I had no idea what the potential upside or downside was. I would really recommend getting somebody, preferably outside of the process, to explain how PE works and how they make their money.”
Fiona adds: “The other thing I didn’t fully understand was that it is ok to go backwards at the beginning of the cycle if you can be sure of a better outcome at the end of the cycle. I was under the impression that we had to deliver on our year one numbers because that is what we promised. I didn’t appreciate that the PE houses heavily discount what people say and were not expecting us to do that. If I had understood that better, I would have invested in a stronger management team at the beginning.”
She also advises being totally upfront when dealing with a PE investor: “Don’t play any kind of games. Be totally straight and don’t hide things because you are all on the same page heading in the same direction. If something isn’t going as it should be, just have a straightforward conversation about it.”
Drax Sector Lead: Sebastian Powell
Associate Director, Business Services
Tel : 020 3949 9567