Deal Mechanic: CBPE & Rosemont Pharmaceuticals

Rosemont Pharmaceuticals occupies an unusual niche: founded in 1967, it makes oral medicines for patients – mostly old people – who have trouble swallowing standard pills and capsules. In 2006, UK-based lower mid-market group CBPE Capital paid £93 million to buy the business from former owner Savient Pharmaceuticals.

CBPE’s previous pharma experience was key to winning the deal, according to partner Sean Dinnen. “When we met the management team, they could tell quickly that we had a good grasp of the pharma sector – which is relatively rare in the lower mid-market, because it’s a specialised area.”

Dinnen and his team felt the business would benefit from more active ownership. “Savient had bought the business opportunistically, and hadn’t really done anything with it. We could see that if certain things were done, it had significant growth potential.”

So it proved. During its six years of ownership, CBPE helped the company more than double EBITDA, from around £8.7 million to £19.2 million, while expanding staff numbers from 156 to 209. This year, it was able to sell the business for £183 million, banking a 3.25x return on its original £53 million equity cheque. Here’s how.

  1. Sticking to the knitting 

The first key decision, according to Dinnen, was to remain focused on liquids, rather than branching out into other related areas (like creams, ointments and so on). “Our fundamental strategy was to develop a business that had a reputation for being best-in-class globally in oral liquid formulations. Another owner could have gone down a different route, but we wanted to remain pure-play liquids.” 

As part of this drive to become best in class, it stopped doing contract manufacturing for other pharmaceutical companies – a high volume but low margin business – to focus on its own products.

It didn’t shun the pharma giants altogether, however; on several occasions it worked with one of the big players to develop a liquid version of their drugs (notably with Lundbeck on its epilepsy drug clobazam, which Rosemont eventually took to FDA approval in the US). But that was a different sort of relationship – and by establishing Rosemont as a trusted expert, it helped to bolster the company’s best-in-class credentials (and thus its eventual valuation).