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THE BIG INTERVIEW: Millbrook’s masterplan ‘to become reality’ after private equity takeover

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The market for providing assisted living services to the NHS and local authorities is dominated by a handful of national providers.

While the sector is punctuated by a few smaller firms carrying out work for councils, most commissioners believe that to serve a growing population under shrinking budgets, complex, largescale and cost-effective care and logistics operations need to be carried out by UK-wide companies.

Among the market’s primary providers is Millbrook Healthcare, which turned over nearly £115m in the year ended 30 June 2018 and operates 29 service centres across the country.

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Millbrook believes it is the only company in the sector that comes close to offering commissioners a fully-integrated solution, encompassing wheelchair services, telecare, community equipment and home improvements.

This approach alone makes it one of the most competitive firms in the space. Last month, Millbrook’s prospects were strengthened further when it entered into a strategic partnership with London-based private investment firm, Cairngorm Capital.

Already a force to be reckoned with, the partnership gives Millbrook the scope and support to follow its ambitions, with the financial firepower to grow with the burgeoning market.

Dr Amit Thaper’s healthcare background will help guide Millbrook.

Cairngorm Capital manages £180m of equity capital, as well as providing its partners with strategic advice and global best practice so Millbrook’s newfound resources and support will enable it to pursue any of the opportunities that the industry offers. What is particularly notable is the investor behind the move and the expertise it brings to Millbrook. 

The purchase was overseen by investment director Dr Amit Thaper, who has a background in healthcare, having worked as a surgeon for several years in the NHS, spending time in orthopaedics, emergency and trauma care. In this way, he is relatively unique compared to many investors.

Thaper has been directly involved with service-users in his career, placing him in a strong position to engage and empathise with them.

“I think we can add value; I’ve practised as a doctor so I know how the NHS works, I know about the interaction between health and social care workers and the various frictions and I’ve operated on patients who have mobility problems. From that perspective, having worked in healthcare and now working as an investor interested in healthcare, it does help.”

The purchase may seem like a natural investment for Cairngorm Capital, given the healthcare expertise of Thaper. However, Millbrook is the firm’s first venture into the health sector and while it has lots of experience in distribution, it is untested in this space. So what is behind the investment and why was it attracted to Millbrook specifically?

Colin Croll founded Millbrook alongside his sons Mark Croll and Paul Croll 25-years ago and was looking to retire. Seeking new owners, the company was approached by Cairngorm, which Thaper says was impressed by the management team’s “laser focus on service-users”.

Millbrook is moving into various AT sectors so it can offer commissioners a full package.

Phillip Campling has led Millbrook’s operations for the last 12 years and now as a shareholder of the business will continue in his role as chief executive. Thaper says that having spent time at Millbrook’s service centres, with its drivers and in various departments across the organisation, the company has shown itself to be not just a logistical operation but one that is deeply rooted in healthcare.          

“When we back a firm we really do think about the management team we’re partnering with. We think of this as a management buy-out in many ways. Colin and Paul had done a terrific job at growing Millbrook. Phillip has been instrumental in that growth and the time was right for Colin to retire so it was great outcome to partner with Phillip and the management team.”

The assisted living space is one that Cairngorm Capital finds attractive. The demographics of the UK and the growing need to ease pressure on the NHS by helping people to stay in their homes for longer means healthcare is increasingly attractive to investors.

 Thaper believes the trend for outsourcing services is here to stay and is confident in the long-term prospects of operating in the sector. It is widely regarded that private companies can run services more efficiently than in-house alternatives, which Thaper says is proven by Millbrook’s data.

Phillip Campling, chief executive and and Annette Cairns, director of wheelchair services, are developing Millbrook’s strategy.

One of the company’s major selling points when tendering is that its integrated range of services are all run internally rather than contracted out to other firms, unlike some models in the industry.                 

Explaining how Cairngorm Capital will work with Millbrook, Thaper says that the firm’s focus will be to support Millbrook’s management, providing the resources and expertise to transform how the company operates and give it scope for growth.

He comments: “Transformation often means achieving scale and the ethos of our firm is that we focus lots on sales and marketing, IT investment, strategy and operations rather than financial engineering. We are much more hands-on in that regard. We join the board and add value where we can, based on our specialist expertise.”

It would seem then that Cairngorm Capital does not plan on simply filling Millbrook’s coffers and then leaving it to ‘get on’. Despite a “hands-on approach” from investors, Thaper insists that Millbrook’s overall strategy will remain Campling’s responsibility. This may be welcome news to critics of the takeover, who suspect that a private investment firm’s involvement with the care provider may cause it to lose focus on the end-user.       

Thaper comments: “Our plan is Phillip’s plan. The strategy remains the same, the management team is the same and the governance is the same. For the commissioners and for all the service-users, nothing changes – zero. Cairngorm Capital will provide Phillip and Millbrook with resources, expertise and capital to increase the offering.

Millbrook’s national equipment depots hold a vast range of products for varying needs.

“That’s more money for growth, more money for working capital, upgrading IT systems and if we want to open a new service centre there will be cash available for that. Our vision is, at a higher level, to be offering service-users best in class care.”

Thaper also dismisses concerns that the need to grow and achieve a return on investment could cause quality to slip. He says that the only way to grow a firm is to provide the best quality, the best care and the best service. “If we didn’t do that, we wouldn’t win new contracts,” Thaper notes.

“We don’t have an investment thesis that says we’re going to sell parts of the business, asset strip or take cash out of the company. We don’t take any dividends or resources away – Cairngorm Capital really does back the team to grow the business. The only way to be successful is if you’ve got a service that is responsive to commissioners and adds value to service-users. Our sole goal is to improve and to grow the service offering, nothing changes in that respect.”

In line with its model, Cairngorm Capital will eventually sell its share in Millbrook onto another owner but views its investment as long-term. It would only sell its share in Millbrook at the point when it felt that the business had grown and transformed to a level that it could no longer add value and the management team would benefit from partnering with a new custodian. Thaper cedes that the level of growth the team is looking to achieve could take time.

Key to expansion will be Cairngorm Capital’s operational focus, which has been its emphasis on previous investment projects. It created the National Timber Group in 2017 through a sequence of four acquisitions and the cluster of companies now turns over close to £300m.

Bringing four companies together meant integrating four separate IT and ERP systems in a largescale project to create a unified platform. Millbrook already has an internal IT system that Cairngorm Capital believes is fit for purpose, although it has identified areas that can be improved.

One idea for example, is to provide wheelchair service-users with a specified delivery window rather than a general timeframe. Another is to eventually introduce an app for increasingly tech-savvy users.

Small changes like this may seem simple but combined, they could make a significant impact on service-users and the tendering process. Longer term, Millbrook may look at recording activity data in greater granularity which would help commissioners as they think about service provision and could be used to improve healthcare outcomes.

Millbrook has traditionally been highly data driven and under Cairngorm Capital’s stewardship, will continue in this way. Aside from its number crunching, the company also owns manufacturers Ultimate Healthcare and Consolor, which could see new product developments as part of the investment. These capabilities, Thaper feels, will add value to Millbrook’s offering in the eyes of commissioners.

On paper, the partnership between Millbrook and Cairngorm Capital is a strong one. However, it is the investment firm’s first foray into the healthcare market, which, although similar to other sectors in terms of distribution operations, is still very much unique in its demands.

Thaper says the business is confident of success. “We think there is a big opportunity in healthcare. We’re applying the same principles that we apply to every company that we invest in, which is to support great management teams with resources and capital but also supplement the board.”

Cairngorm Capital has installed a new chairman at Millbrook in Michael Kerins. He was formerly the CEO of an industrial distribution company which he expanded to over £200m in revenue. In that process he grew the firm’s depot base in the UK to more than 90 sites.

Millbrook has almost 30 service centres and Kerins is well placed to help it increase its geographical coverage. Cairngorm Capital’s Victor Vadaneaux, who is an expert at making operations scalable, also joins the board.

Thaper says: “For us, whether it is healthcare, building products or timber, the growth thesis is the same. What’s slightly different in this space is that you can only grow by winning and retaining contracts. We need to make sure we’re the provider of choice for commissioners and local authorities and that’s all about making sure we’re responsive, caring about service-users, have the best IT and the best management structure and operations.”

While Cairngorm Capital has big plans for Millbrook, the transformation will be measured and gradual. In the short-term, end-users and commissioners will not see any major changes and services will appear the same as they were pre-transaction.

Some changes to certain services will be implemented in the first six months to a year but over time users and commissioners will begin to notice improvements in IT, infrastructure and data provision, Thaper says. The primary benefit for end-users will be in how they interact with Millbrook in a more convenient way.   

From a top-down perspective, Millbrook will continue to tender in the same way and will continue to draw on its comprehensive offer of in-house services during conversations with commissioners.

Thaper comments: “We are not going to be tendering in a different way. I think we will grow organically and only carry out mergers and acquisitions if we think it adds value to the commissioner or service-users. If it broadens the offer, brings new tech in-house or extends us geographically, that would be something we’d look for.”

While Millbrook intends on organic growth and maintains that it will not acquire companies for the sake of it, nobody can deny that Cairngorm Capital’s investment will likely contribute to a shift in the sector. Millbrook now has the muscle to compete for and sustain contracts further afield and thanks to its new expertise and resources, can freely enter into the necessary markets to complete its services jigsaw.

Most objective observers would back the company, even during today’s challenging and highly competitive market. But with an experienced chief executive at the helm supported by a board of operational experts, Millbrook is now particularly well placed to capitalise on the rapidly growing assisted living sector.

Nobody quite knows how much more of a stake the company will claim in the market but Millbrook is certainly a business its competitors will be watching more closely than ever.

Who is Cairngorm Capital?

Cairngorm Capital boasts a portfolio of companies worth more than £650m in revenues and responsible for around 4,250 employees. Headquartered in London, it has two funds worth more than £180m combined and specialises in investing in manufacturing, distribution and now assisted living sectors.

With a team of nine investment professionals and seven operating partners with broad experience of various industries, Cairngorm Capital takes a collaborative, long-term view to investing, focusing  on growing and transforming companies to create market leaders.

An area of expertise for investment director Dr Amit Thaper is assisted living. He spent several years as a surgeon in the NHS covering a number of specialties including orthopaedics, emergency and trauma care so understands the provision of healthcare as a practitioner and the interlink between the NHS and social care.

After leaving the NHS, Thaper worked at Bain & Co, a global management consulting firm, on a number of public and private healthcare projects both in the UK and the USA, which brought an international element to his expertise.

Thaper’s role saw him helping companies make investment decisions and after deciding he liked the “hands-on approach” and getting involved in the operations of a company and thinking about how to grow businesses, he joined an investment firm in the US. Eventually, he landed back in the UK where he is now part of Cairngorm Capital’s investment team. He will now oversee Millbrook’s development under the investment firm.

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Joe Peskett

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