What was the deal?
The sale in October 2020 of K2 Medical Systems, a medical tech company based in Plymouth, to N Harris Computer Corporation, a division of Constellation Software, a global software firm with its headquarters in Canada.
K2 is a doctor-led niche maternity health tech business that was spun out of the University of Plymouth and Plymouth Hospitals NHS Trust in 1989. The business is the clear market leader in the UK, selling its products to more than 90% of the UK’s maternity wards and NHS Trusts, and it also has operations in Australia and the US. As at June 2020, it had net assets of £4m and employed an average of 42 people. The deal value was undisclosed, but it was sub-£15m.
Who exited the business?
The shareholders decided it was time to realise some value from the business. One of them wanted to exit in full, and CEO Dr Robert Keith became executive vice-president and retained an interest in the business going forward. The core management team also stayed. So there were different objectives for two different shareholder groups. Robert wanted a partner to help accelerate the product’s uptake in the NHS, as well as new geographies. The acquirer, Harris, has significant presence in the US, Australia and globally. The acquisition added to its international footprint and significantly moved its focus on the maternity sector.
How were you introduced to the deal?
Foot Anstey in Exeter, the retained legal advisers to K2, introduced us at the start of lockdown in April 2020. We pitched in strange circumstances. I never actually met Robert because we couldn’t travel. The buyer – who I also didn’t meet – was in North America.
In many ways, the deal lent itself to being done remotely and we still built quality relationships. Everybody was very responsive. Harris made an off-market approach, but it wasn’t the only interested party, which put K2 in a strong position. Harris already knew a lot about the business and proved it had the interest and was the right partner, so we went with it and Harris began its due diligence. The deal completed in six months.
Who were the advisers?
We acted as corporate finance lead adviser with Tom Simmonds supporting me, and provided private-client tax assistance to Robert and the management team. Foot Anstey did the legal work. K2’s accountants Condy Mathias played a key role by supporting management in pulling together the financials for the information memorandum and helping with diligence. Harris has an in-house M&A team, including health sector specialists. Fox Williams was its UK legal adviser.
How was it working remotely?
There was a lot of very detailed work, which was actually easier to do virtually than across a table. But as we got into negotiations, it did get harder – everyone was still finding their feet using Teams. I’d never choose to replace the process of building a relationship with a client in person with a wholly virtual deal, but this showed it was possible.
What were the challenges?
We had to ensure the acquirer’s and vendor’s views on growth matched. There were some large contracts and a lot of opportunities, some accelerated by the pandemic, others slowed. It was an interesting trading period, to say the least. Preparation was critical: the more you can do to understand the numbers up front, the smoother the process. We had a seamless, harmonious team – important when dealing with a large corporate that’s perhaps used to getting its own way. We put in a lot of time to make sure the deal was structured right.
The CV
Tim Spooner is a corporate finance director at KPMG in Bristol. He joined the firm’s London office in 2001, having graduated with a law degree at the London School of Economics. He worked in audit and trained as an ACA, then moved into corporate finance in 2004.
In 2006 he joined KPMG’s corporate finance team in Sydney, before moving to the Bristol office in 2011.
Recent deals
- Advised shareholders in the Dunedin-backed MBO of Acquis Insurance, in May 2019
- Advised management of building products company Siderise Group, in H2 Equity Partners-backed MBO, in June 2019
- Supported BGF on its £11m follow-on funding into Molson, a construction equipment dealer, in November 2019