Listening to Ian Richardson detail the latest plans for his new company, you would be hard pushed to remember that entrepreneurialism is not actually in his blood, and that in fact up until he entered his fifth decade he was quite content to remain as one of Leeds’ top corporate lawyers. This latest venture is actually the 51-year-old’s second go at building up a business, after he and Dr Magdy Ishak sold Covenant Healthcare in a £170m deal in 2005.
You could even call it a third go, if you count a casual acquisition he made in between the two to help out a York-based company that was in trouble. Like Covenant, the new business, SkinCity, is very much geared at the broad healthcare market, only this time it’s an umbrella company focusing on preventive medicine and patient wellbeing.
“Preventative medicine and stress management are two areas that we feel will be incredibly important in years to come,” he says. The company’s first acquisition was Aromatherapy Associates, a London based spa and aromatherapy products provider, at the end of 2009. But late last year it came back to Richardson’s Leeds roots by buying two companies which jointly run the Leeds Screening Centre. The centre has capitalised on the city’s considerable healthcare expertise by offering, among services, advanced screening for Down’s syndrome in foetuses, and tests for pre-eclampsia. It was previously jointly owned by the Leeds Ultrasound Screening Service (LUSS), founded by Gerald Mason, a consultant in feto-maternal medicine at Leeds General Infirmary, and Genome, founded by Professor Howard Cuckle from Columbia University in the US who is also emeritus professor at the School of Medicine at the University of Leeds. Both men retain a stake in the new business.
“The centre has developed an extremely accurate test for Downs,” says Richardson. “That is the key test that they do. I couldn’t explain it completely myself, and you would need Howard to go through statistics, but the test they do is significantly more accurate than what is currently available.” The services provided will of course be private, but Richardson disputes any idea that the growth of such companies could lead to a two-tier NHS, with only the richer patient being able to afford the kinds of services that the screening centre provides.
“If it is going to keep a lid on its costs the NHS has to go more towards more prevention,” he says. “In fact, the private sector working with the NHS can be extremely effective.” Nor does have any truck with the view – as espoused by some disability campaigners – that the kind of genetic and pre-birth screening his company is looking to provide is a sinister development in that it could eventually lead to people trying to screen out all perceived abnormalities to create the perfect human being.
“I don’t think that’s a totally silly argument,” he says, “but nobody would want to move towards perfect human being. Genetics is however going to allow us to be given far more information about living a life in a way that will give it a maximum possible span. Within 20 to 30 years somebody coming into adulthood will have their own personal healthcare mapped out. So, if you are susceptible to heart disease you will have a different lifestyle from someone who is not genetically predisposed to it.
“This is still very young technology. Science has given us an incredible asset, and I don’t think people have worked out how to use it. But, with an ageing population and increasing costs, we have to move towards preventive rather than reactive medicine.” He has hopes that SkinCity will grow quickly. He thinks it should make around £10m in turnover this year.
“Aromatherapy Associates is looking to go into retail with individual shops,” he says. “The genetic business is something we want to develop and extend. We are keen to open in other locations.” As with all umbrella set-ups, he will eventually get some advantages from cross-selling between the two businesses.
“But we have bought two businesses in less than two months,” he says, “so we need to bed them down.” That won’t just involve him; Richardson is only interested in buying businesses which have a day-to-day general management team he can rely on. But even if things should not go totally to plan, he has experience of dealing with a troubled business as well.
In 2007, not long after he had finished his earn-out period and only eight months into what was supposed to be a retirement, he bought York-based travel company Travelscope out of administration and installed Jonathan Wackett – or “Wacko” as he calls him – as managing director. Wackett was a former head of corporate finance in Europe for Pricewaterhouse Coopers, someone Richardson had done many a deal with during his time as a corporate lawyer in Leeds in the 1990s.
“I had known the former owner of Travelscope since I was seven and we were both at school in Pocklington,” he says. “I knew the business, and got a call from a couple of the managers there. They wanted to know if I could buy certain assets. They were having difficulty selling the business as a whole to a third party because of data issues. A lot of customers were on databases that had come to them through reader offers with newspapers, so it was not an easy situation in terms of intellectual property.
“I decided to back it, and the price was very low,” he says. “I couldn’t turn it down. Wacko was a very well-known guy in corporate finance, very gifted. He’s a bit older than me and had pretty much semi-retired. But he is a guy I have utmost respect for. He has some equity interest in it, and we have made a couple of acquisitions. It will probably turn over between £10m and £11m.” Richardson himself remains a hands-off owner of the company. But buying it had clearly had whetted his appetite for more business dealings, this time with his old colleague Dr Ishak who, like Wackett, is also considerably older than him. The retirement plans seem to have gone out the window.
“Just three months into my retirement I had already done all those things I wanted to do,” he says. “I like history, so I had seen many battlefields and visited China and Japan, but I got very bored.” He adds lightheartedly that his family – his wife and two teenage children who now live in Hertfordshire – were keen to see him back on the road. “The last thing they wanted me to do was retire,” he says. “Me being away meant I was not bollocking them about their table manners.” Nevertheless, he says there will be changes this time around from his first business venture. “I have learned lessons, such as not taking life so seriously,” he says.
“When you first set up your own business you tend to over-react to success and failure. Now I am more evenhanded. If you have a bad day it’s not the end of the world, and if you have a good day, tomorrow could be bad.” There will be differences in management structure too. This time around it is Richardson who is chief executive of SkinCity, with Ishak as chairman. When the two of them ran Covenant Healthcare, Ishak was very much more in the driving seat – and had a higher profile. Richardson remembers how they two initially got together.
“I first came across him in the late 1980s when he became chief executive of Cresta Care,” he says. “He sold out and in 2001 rang me to say, ‘Do you want to start a healthcare business?’. I had been on the board of a couple of listed companies – the Peterhouse Group and Firth Holdings – and I always had an entrepreneurial desire in me. So I thought I would give it a go.” The company grew rapidly, with backing not just from Ishak himself but also from private equity company Phoenix Ventures and the Bank of Scotland. It was soon running six private hospitals, a cosmetic surgery business, and three psychiatric hospitals.
“Then in 2005 we received offers we couldn’t turn down,” says Richardson. That offer came from rival private equity house Cognetas, with over £100m in funding from Bank of Scotland. It has to be said the deal, which at the time was seen as a success story for Bank of Scotland’s then much-vaunted Integrated Finance offering, has not been viewed so favourably in hindsisght. Covenant became hugely indebted as a result of the deal, and when Bank of Scotland was taken over by Lloyds Banking Group, former Lloyds boss Eric Daniels was said to have taken personal responsibility for finding a buyer for the company. It was eventually sold to General Healthcare, Britain’s biggest private hospital operator, in a deal which pretty much wiped out what equity Cognetas had. However, Richardson is unwilling to suggest it could have been otherwise.
“We are in a different funding environment now,” he says. “At the time, those values didn’t seem silly, now they do. It’s a mistake to make judgements in an environment about things that happened in previous environments. There were not too many people saying the deal was overpriced at the time.” He does concede to feeling sorry for private equity houses now.
“It’s difficult for them because so much of value creation was based around gearing, and there isn’t any gearing any more,” he says. “Nor is there likely to be for a couple of years. But in some ways the less money private equity puts in the better. It used to put in 10% of the risk and take 100% of the upside. Now you get to create value with a management team, rather than allow the gearing to create value.” But the 2005 deal has clearly given him a top-notch lifestyle, and has left both him and Ishak in the enviable position of being able to fund their acquisitions without any recourse to banks.
“We have a preference to control our own destiny,” he says. “It would have to be a good deal for us to want to have outside investors.” So why risk all that wealth by acquiring companies when nationally there are barely any signs of economic recovery? “Business is difficult whether you are in a recession or in a boom,” he says.
“All that happens is the problems change. In a boom you have problems too that are just as difficult. You have labour shortages, and difficulty in getting suppliers. In a recession you can buy things much more easily, and get deals much more easily, but it’s more difficult getting paid and surviving. With a boom you have the reverse situation. You can’t get offices or people but when you do you can sell easily. I would rather have a prosperous environment than a recession, but that isn’t necessarily a dictator.” That does sound like a true entrepreneur talking. Was it to have such an experience that he gave up corporate law? After all, by 2001 he had been senior partner at what became Eversheds.
“When I made the move most people thought I was barking mad,” he says. “Law is hard work but is very well remunerated, and is relatively risk-free. But as a lawyer you have a shelf life. It’s a very gruelling job, reading lots of documents. All lawyers fancy themselves as entrepreneurs.” For the moment, an entrepreneur is what he wants to continue being, but he has not lost all sight of the legal world either. He has been a key adviser in helping Sharon Needle, another Leeds corporate lawyer, set up her own practice in the city. And for the time being it will be the Needle Partnership, as it is called, that will most likely be doing Richardson’s deals.
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