Managing Director

Overview

JW Markets is working with a PE-backed light manufacturing business in the medical products sector. The business is located in between Durham and Middlesborough. Following a very recent MBO (backed by a Northern private equity firm) a managing director with strong leadership skills is required to head up a key division within the Group (here referred to as MCFD). This division is an entity largely independent of Group, with only Finance shared with HQ. The division manufactures medical cleaning fluid for use by the pharmaceutical industry in clean room settings.  

The role will not be for everyone. As the MBO was very recent, this is an opportunity to join the MBO team at the start of their journey under a new ownership structure. This structure and an injection of capital by PE now enables the team to execute their growth plans. This includes equity incentives aligned towards a successful exit in 3 to 5 years. For the MD this is expected to be 5% of the Group’s value on exit (above hurdle). Aligned with the MBO team, salary is below market to minimise cash drag prior to exit. Therefore, candidates without the confidence to back their ability to generate returns on exit within the manufacturing sector are unlikely to be suitable for this role.

Whilst the current project has an expected 3 to 5 year term, there is significant optionality on exit, e.g. exit post-handover or continue as CEO of the independent entity.

Success in this role will serve as a springboard to future roles within Private Equity.

As well as heading up the Group's key division, the MD will sit on the Group board, providing input on Group-level strategic decision making. Also, you’ll be working directly with private equity, as the PE investment director has a board seat as NED. Therefore, for candidates without Group-level board room experience, this is the perfect role to step up.

The Group

The Group has three distinct divisions:

• Business 1: Located in Worcestershire (current HQ) - focusing on manufacturing and 3rd party distribution, expected to be sold in the short term.
• Business 2: Located in Worcestershire - specialising in sub-contract manufacturing, expected to be held for 3-4 years to maximise value from restructuring and investment.
• Business 3 (MCFD): Durham / Middlesbrough area - involved in the manufacture of medical cleaning fluid, expected to be held for 3-4 years and benefiting from significant investment in people and manufacturing capabilities / automation.

History / background of MCFD

The MCFD division began trading in 2012 with slow growth. In 2015 the current CEO of the Group was brought in, and pivoted towards selling into distributors which accelerated growth. In the past few years, the group has been impacted by a lack of management information, and is currently around breakeven. The Group CEO was also previously restricted from hiring a strong MD to run the division due to imposed budget constraints. Post MBO this is no longer the case.

Due to a lack of day-to-day supervision (given the Group CEO is based in HQ in Worcestershire) quality of service has suffered in terms of lead times and full order fulfilment. This has led to weakness in pricing negotiations and a loss of margin. Existing processes are considered sufficient (albeit probably not optimal) to ensure good customer satisfaction. However, adherence is ad hoc and largely dependent on whether the Group CEO is on site to monitor activity.

90% of the MCFD’s sales are to overseas markets, with significant potential for expansion within Asian markets.

It is currently expected that a General Manager may also be required, but that will be a decision to made by the incoming MD.

The existing team are considered capable, but all staffing decisions will be made by the MD of MCFD as part of their initial review and on an ongoing basis.

The role

It is imperative that the MD takes ownership of customer satisfaction, commercial decision making (e.g. pricing), the order book, production efficiency and capex plans whilst providing strong leadership to the team. The MD of MCFD will sit at statutory board level within the Group, feeding into Group level decision making (say 5% of attention focused on Group matters).

It is expected that the MD will refocus attention on proactive systems to monitor customer satisfaction, including a shift to OTIF and distributor scorecard systems (which are becoming more commonplace).

Production scheduling and production processes are relatively straightforward. However, experience of manufacturing within pharmaceuticals-grade clean environments (i.e. exceeding ISO9001 by some margin) would be helpful. Production is relatively simple, but quality is paramount.

With respect to production efficiency, it is expected that the MD will have strong experience of production efficiency methodologies (e.g. SixSigma, Lean, etc.). Material funds have been earmarked for expansionary capex over the next few years to improve production efficiency and capacity through automation. It is expected that the MD will work closely with the Group CEO and CFO to optimise and agree the capex plan and schedule implementation. The business is currently producing at full capacity, i.e. it is capacity constrained.

Due to the lack of management information, it is expected that the MD will work closely with the CFO + CEO and the rest of the board to identify and implement relevant KPIs to be monitored by the MCFD MD and reported to the wider board going forwards.

Over time the MD is expected to increase the independence of the division by investing in the required operational infrastructure in preparation for sale as an independent entity in 3-5 years.

Whilst the nature of MCFD’s products mean that medium term product demand is relatively predictable, restocking by distributors can sometimes be less predictable. Experience upward managing distributors may be useful.

It is expected that the MD will be from a production background, with experience with (or adjacent to) pharmaceutical / medical devices grade environments.

The role will be onsite 5 days a week in Sedgefield, with some travel for board meetings + ad hoc visits to HQ in Redditch.

Requirements

• At least 10 years experience in manufacturing (light manufacturing is fine)
• A background in production / manufacturing operations
• Already living within commuting distance of the Durham / Middlesbrough area
• A deep understanding of production efficiency methodologies
• 5 years in a leadership / management role
• Able to provide references from a Group or divisional head of a UK-based manufacturing business (ideally a statutory director) + case study
• Ideally strong experience of pharmaceuticals-grade / clean room-based manufacturing

Culture

Culturally, it is expected that the MD will be a calm head with a solutions-oriented attitude. Leadership skills are expected to be very strong, with a high level of emotional intelligence to foster cohesion, job satisfaction and strong worth ethic within the MCFD division.

With time the MD is expected to instil a culture of proactivity, instead of the current default of reactive firefighting within an often-chaotic environment.

The right candidate will be straight down the line and share the determination and focus of the rest of the MBO team. It is important that the individual enjoys working in a results-oriented environment, alongside board members and wider colleagues for whom enjoying the day-to-day is a key priority, i.e. it is important to the MBO team that you all enjoy working together.

Financials

MCFD generates £8m of revenue and is currently around breakeven. It is expected that within 24 months the business will return to generating £2m of EBITDA, e.g. once the quality of management information improves. The business is certainly underperforming its potential but is not considered to be in a turnaround situation – it just needs time and management attention. With improved commercial decision making and marketing there is also the potential of material sales growth, which historically hasn’t been a focus due to capacity constraints.

Compensation

Compensation will be negotiated on a case-by-case basis, reflecting the candidate's track record and experience. Candidates should be motivated by incentives aligning with the wider deal team and their backers. This involves below market salary and exceptional returns on exit through equity-linked participation (sweat equity), as is the case for all senior members of the MBO team who are focused on a successful exit.

The MD can expect returns on exit ranging from £0.25m to £0.5m within 24 months, or £0.5m to £1m in 3-4 years (equating to 5% of equity value on exit above hurdle). This is largely based on pricing improvements as quality of service reverts back to normal.

With Businesses 2 and 3 (MCFD) both currently capacity-constrained, sensible capex, improved MI and targeted investment in sales and marketing could drive growth beyond these estimates. This will be a key discussion point with the rest of the MBO team and PE house.

The expected salary is between £120k and £150k, with relative seniority with respect to the other members of the MBO team driving the final number. It is considered unlikely that the top level (or close to it) will be attained. The role will include typical benefits in addition.

References

Candidates must be able to provide a case study (a short email is sufficient) detailing their skills and quantified achievements within the manufacturing sector, accompanied by a reference from the relevant CEO or Divisional head (UK only).

Please apply only if you are an excellent fit for the role and can provide a relevant case study.

Process

The Group CEO and PE-backer are eager to speak with potential MDs as soon as convenient. The process will begin with a call with JW Markets, followed by calls/meetings with the Group CEO and PE Investment Director. Appointment will be made as soon as possible, albeit it is expected that interested parties will be on notice periods.