Which comes first – the Board or the Investor?

This is a question we are frequently asked by SME owners, and that frequency is only increasing given the current economic climate, Brexit and impending Capital Gains Tax increases, which are leading many SME owners to contemplate their Exit options.

Recently, Rowan Executive Search supported Lee Gregson, owner of tech-led services provider fulfilmentcrowd, in answering that question. Rowan helped the business to shape and build out its Executive Board, with the focus on increasing its value and attracting investment. This came in the form of a £7.5 million Private Equity minority investment deal from BGF – in the space of just nine months.

Rowan worked with Lee and his MD Lee Thompson, to understand the global market opportunity, explore the types of skills and expertise required to accelerate growth, and how best to align these considerations to potential future investors. Rowan then worked with the owners to build out a new Board. The key appointments that were made were NED Investor Chair Mike McGrath, CFO Peter Hosker, CMO Vanessa Ashworth and COO Paul Taylor, an impressive team for the next phase of growth.

The short answer to the question is – it’s the people that come first! As a Founder, your own drive, ambition, focus and control may have been the catalyst for success. However, scaling up is often a different proposition. When PE houses and other investors evaluate a business, they need to see a Board that can deliver a strategic plan, not just a Founder that can describe it. They need to know that the Executive team has the experience, know-how and ambition to take the business to the next level and provide them with a return on their investment. Experience tells us that the infamous “multiple” that investors arrive at when valuing a business is often significantly higher when there is an experienced and capable Board already increasing the ROI.

When fulfilmentcrowd started working with Rowan Executive Search, Rowan suggested that the business would benefit from external investment to fulfil its ambitious international expansion plans, and to continue to evolve as a disruptive force in the e-commerce services sector. To attract this investment, Lee would need to expand the Executive team.

After taking the time to understand the strategy, culture and ambitions of Lee and the team, Rowan MD Paul Waite introduced one of Rowan’s trusted NEDs, Mike McGrath (pictured), with the knowledge that he would be an invaluable strategic mentor for the business. Mike was a critical appointment – his experience helped the business define and clarify its growth strategy, and his credibility and charisma got the workforce engaged and bought in to this vision.

From here, Rowan also identified the immediate need for a CFO with the ability to pinpoint where the potential for accelerated growth lay in the business, as well as the ability to improve performance internally, to attract investment. This led to the appointment of Peter Hosker – a highly experienced CFO with relevant PE growth journey experience.

International customer acquisition is key to fulfilmentcrowd’s international expansion. This led to the appointment of CMO Vanessa Ashworth, and the introduction of some of Rowan’s key international e-commerce clients to the business.

Mike’s strategic vision and know-how, Peter’s understanding of the financials and the business’ performance, and the subsequent appointments of Vanessa and incoming COO Paul Taylor readied the business for the growth journey that PE investment would bring. Throughout this process, Rowan worked with fulfilmentcrowd to identify and consult as to which PE Houses would be suitable.

When asked about readying fulfilmentcrowd for its growth journey, Mike said;

“The three most important things in any business are the Management, the Management and the Management. Paul understands this, and with my strategic experience and his knowledge of shaping and building out a Board, we were able to make the correct hires to free up Lee T and Lee G to focus on their core skillsets; namely, fronting the business and technology development, respectively. This step change is critical to accelerating the business’ rate of growth. After the first key hire of Peter Hosker as CFO, Paul also had a hand in advising fulfilmentcrowd on which investors might be appropriate for the business and helped facilitate those discussions.”

When asked about working with Rowan to appoint a new team, Lee Thompson commented;

“I was introduced to Paul through a contact at Barclays and could immediately tell that he had fulfilmentcrowd’s best interests at heart, as well as genuine curiosity about the business. Paul saw our growth potential, but also some of the constraints we faced. We’d doubled in size in 2020 and I’d made the official step up to MD, but Paul suggested we would need a new Management and Board structure to continue on our growth journey. Firstly, I was introduced to Mike, who was instrumental in professionalising the business and developing the right culture and philosophy for international growth. Mike and Paul recognised the need for an experienced, detail-oriented yet strategically-minded CFO, whom Rowan found in Peter Hosker. It was Mike’s strategic vision, along with Peter’s detailed, data-driven financial planning, which allowed us to create a credible story to show potential investors.

“We also worked closely with Rowan to appoint two other new critical hires; CMO Vanessa Ashworth and COO Paul Taylor, who is starting soon. I was particularly impressed by how Paul and the Rowan team were not only able to find the right professional profiles, but the right cultural and personality matches too. The Search and Assessment process was thorough, meticulous and efficient, and I always felt like they were ‘on the same team’ as me. I’m looking forward to working with Rowan in the future as we build out our operational capability for our overseas expansion.”

Private Equity investment followed nine months later, with the aforementioned £7.5 million investment from BGF – another Rowan introduction.

BGF Investor Pinesh Mehta, who led the deal, said;

“The biggest question when looking at a potential investment is; is the Management team backable? Lee T and Lee G made a great team, and Mike, non-Exec Chair, was able to help shape the business for growth. Having Peter in place as CFO was really helpful too, as it afforded BGF confidence in fulfilmentcrowd’s robust financials. With the new CMO in place and the new COO appointment due to join in the near future, we’re looking forward to executing the business’ growth plans via both national and overseas customer acquisition. Paul was instrumental in introducing us to fulfilmentcrowd and played a key role in those initial discussions.”

After its best year in 2020, fulfilmentcrowd’s turnover is expected to hit £12million this year, with predicted revenue growth of 58%, in addition to new European and North American distribution hubs.

The business started in Chorley as a family affair, having been set up in 1992 by David and Sylvia Gregson, with son, Lee, starting soon after. Lee Thompson joined in 1998 and after a long stint as Sales & Marketing Director, during which he shaped a growth strategy, was elevated to MD in summer 2020. The fledgling company focused on software development and licensing in the mail order vertical but identified a gap in the market for value-added services such as fulfilment, particularly in the SME space. With necessary adjustments, the business evolved into a disruptive, cloud-based tech company with a service offering that is scalable and repeatable on an international basis.

Rowan Executive Search is the North-West’s leading Search and Assessment firm for privately-owned and PE-backed SMEs. Rowan’s work with fulfilmentcrowd was led by MD Paul Waite (pictured).