Alliance Medical
Transaction Background
Graphite Capital participated in funding the management buy-out of Alliance Medical in April 1997. This enabled institutional investors to exit, existing management shareholders to sell some of their investment and new management to be incentivised. Alliance Medical is the largest provider of magnetic resonance imaging (MRI) scanners and related services to UK hospitals. It tailors its services to release the hospitals from the financial and operational risks of having an MRI scanner on site.
Deal Attractions
Alliance Medical was the pioneer in its field and therefore had a dominant market position. Its strategy was to capture a significant share of the emerging market for static NHS scanners whilst maintaining its dominant position in the public and private mobile market. The research we undertook indicated that the market would grow rapidly as there was a relative shortage of MRI scanners in the UK. In addition the business benefited from recurring revenues, with over 60 per cent of its turnover under contract for at least three years.
Achievements
- we strengthened the existing management team with the addition of a finance director
- Alliance Medical was propelled to the forefront of the growth of static MRI scanners at UK hospitals
- an Italian joint venture was set up as a first step into Europe
- turnover grew from £9.6 million in 1996 to £17.6 million in 2000
- operating profit grew by 20 per cent during our ownership
Exit
- the business was sold after a competitive auction in January 2001 for £84 million compared with an entry valuation of £25 million
- the exit price represented a multiple of 34 times historical earnings before interest and tax
- we made a money multiple of 3.1 times and achieved an internal rate of return of 38 per cent
