Episode 24: I sold out to Accenture - but my new business will be bigger

0:01Chris Maguire:Welcome to the Dealmaker Uncut podcast where we speak to some of the UK's most exciting entrepreneurs and hear their investment journeys. We'll discuss the challenges, successes and lessons they've learned along the way with expert deals commentary from Jonathan Boyers, head of Alvarez and Marcel Corporate Finance and me, Chris Maguire, executive editor at Business Cloud. Welcome everyone to the latest episode of the Dealmaker Uncut Podcast powered by Avarus and Marcel. My name is Chris McGuire and I'm the Executive Editor of Business Cloud. We're in London today and I'm joined by multiple award-winning dealmaker himself, Jonathan Boyers.

0:38Chris Maguire:Jonathan's been involved in deals totaling billions of pounds during his long and illustrious career and he's a Managing Director and Head of Avarus and Marcel's Corporate Finance Practice here in the UK. Welcome Jonathan. Hi Chris. And I'm looking forward to today I'm looking forward to today's guest as well because this gets really inside the deal and our guest today is a real character. In the first part of the show we're going to be interviewing our special guest. After that we'll be taking a short break and in part two Jonathan will be leaning on his 38 year career in corporate finance to answer listener and viewer questions.

1:10Chris Maguire:So Jonathan put our listeners and viewers out of their misery. Who are we speaking to today? Thanks Chris. Well today we're speaking to Mark Sweeney who is the CEO of a Welsh technology firm, De Novo Solutions. So Mark's a serial entrepreneur, won lots of awards as a founder, been involved in several start-ups and one of his businesses, Certus Solutions, was sold to Accenture. And I'm looking forward to hearing the story. So welcome Mark. Thank you. Thank you very much for having me. I always think, Mark, when we do that bit, who are we speaking to today? It reminds me of Rainbow, if you're of an age.

1:48Chris Maguire:Which window are you looking through today, Jonathan? Are you saying I'm Bungle? No, I'm not saying you're Bungle. I'm not saying you're George either. Does that make me zippy? Absolutely. One for the kids, that joke. Mark, I'm going to take you back to the beginning as well. Although you're proudly based in Wales, you haven't lost your Bexley Heath accent. I think I'm right in saying as well that had you not gone down a road into computers, your big dream was to be a drummer in a rock band. Is that right? Absolutely. Absolutely. But my mother and father had other ideas for that. You've still got the drum set, haven't you?

2:24I've still got the drum set and I still dabble and play.

2:28Chris Maguire:It's not too late. It's not too late for you. Your first job was printing bank statements at Lloyds Bank. But then I think serendipity played a part when you were asked to oversee a project many years after that, incidentally. when you were asked to oversee a project for the prison service in Wales and that led you to set up CERTA Solutions. So just explain that bit of your life. Yeah, I left school. To be honest, I'm not the A-level student. I kind of bunked off on my A-levels and had enough of it but I found myself in the world of, in the 80s, what we call data processing department which is the fledgling beginnings of the IT industry back then.

3:12Working on the technology, IBM technology, they put man on the moon in the 1960s, so the big mainframes. So that's where I started. But you start at the bottom, in the basement, input-output operator, I think was my grand title. So the input was put in the tapes and one for the kids, Joe 90, those big tapes on tape machines. and the output was printing people's bank statements so that was that's where I started from there but you know as anything I got myself out of the print room and started a career in what became information technology so went through operations programming was a DBA and then really I suppose what I became was because it was quite fledgling back in the 90s as and what I identified myself was was a basically one of the first professional technology project managers so I was a project manager and implementing systems and then ERP came around in the mid to late 90s and I got involved in that so that's where that was where it all started from and moving through so you you set up Serta Solutions in 2007 yeah and it might just be interesting to hear you know how you went about doing that what prompted you to do it and how that business developed yeah um I think it goes back to when I was like I'd done all the jobs in IT and going up for project management and then I I got involved ultimately in sales business development and I got to work for an Australian company run by an entrepreneur and I got to spend five years really working very closely with him as part of as a technical consultant to him but I got to really see how business operated and and was undertaken and that company was acquired a bit of a reverse takeover to get itself onto the the the stock market and I went through that process but at the end of it I felt I kind of wanted to try it myself in some way.

5:19Obviously not as grandiose as that business ended up being, but I just wanted to get into it because I had been around it so much now. And the first business I got involved in failed, basically, completely. And to be honest, I don't talk about it that much because I got sacked from it. So there's a whole story. but then I went back to being contract project management and I found myself by serendipity through people I knew the prison service then had a program that wasn't going so well but it was just an ERP system and a record one and that's how I got into it and as a contractor I started as as Sirtis was myself and then myself and some people that I knew around me that helped me created the product the deliver the program and that's that's how it all started that was the the initial genesis of of it and and to be honest it was just based out of an idea that we were doing these programs in the public sector and it was the first time I'd done a public sector project and I just felt the standard suppliers that were delivering to the public sector they just weren't that very good they were very large and very big and I thought well we can do this better than them and it was nothing more complicated than, well, we can do this job better than you.

6:43And that was the starting point of it. And so you grew that business, got to around about 10 million. Yeah, yeah. And then eventually Accenture came along and you sold it to them. Yeah. Do you want to talk, can you talk about how that came about and how that felt? So the first iteration of Certus was, and a lot of people started off, they start off as, well, back then, probably not so much now. But you start off as a contractor and then you have so many people around you to do a project. And one of the people that I met was my long-term business partner, Tim Warner. And he was a solution architect, but I was more of a project manager.

7:28and by serendipity we just happened to know some very senior people in oracle through the work we were doing and oracle were working on a project called fusion which became cloud and they basically invited us because what they wanted to do was talk to people that actually knew how to implement the systems and they didn't want to build this um oracle applications which basically digitize transform hr payroll finance um business operations they they basically didn't want to build something in an ivory tower that couldn't be implemented so they would show us what they built and we would say that's great or that's not so great because we can't implement that and that's where it became So we became the pioneers of Oracle Cloud in the UK.

8:20And that was the real differentiator for Certus. We really created the market. We redefined how cloud would be implemented. Very different to doing on-premise systems that we had done for the 20 years previously. And we literally wrote the book of how to do it. And that was the big differentiator. But we went further than that. we understood that most businesses, regardless of industry, 80 % of what they do is the same for the back office. It's the 20 % that makes them different. So what we went about doing was creating a blueprint. And we created a blueprint for government operations way back in 2015.

9:01And that led us to winning the likes of the Office for National Statistics, the Treasury, and ultimately we won the home office and we won that with Accenture. And ultimately Accenture came along and acquired the business. How did that happen? Where we were was we were working with Accenture on winning the home office implementation for Oracle Cloud. They called it the METIS programme. And all our eggs wasn't in one basket. It was obviously working right across the public sector, but we also had quite a decent sized private sector business that was developing. We had the likes of Willis Towers Watson, DHL Supply Chain and Skanska Sweden.

9:51And some of those clients were also, Accenture obviously had touch points with and we were growing and that's where the conversation began about potentially acquiring this. So it just evolved from a business, from a trading relationship? Yeah, effectively. And I suppose when you're working together from their perspective, you try before you buy from that perspective and it moved forward. But the advantage they had was that Certus was the first mover advantage. It was the brand in the UK for Oracle implementation. So it was of this type. And there was an Urnok for three years. So did you stay for three years and work with them?

10:34I stayed really for a year with them and then I was still obviously locked under legal obligations with them. But then COVID hit as well so I kind of sat COVID out on the sidelines for a couple of years. And it was from that I suppose to a degree of inactivity should we say that actually I felt I was still young enough and had something to offer. and I wanted to come back and do things again. And I think things that we wanted to do through the acquisition unfortunately didn't work out and we couldn't do them and we still felt there was opportunity and there were still things we wanted to do. So a lot about DeNovo was the driver for it to a degree, was unfinished business.

11:24We had a lot of things that we wanted to do that we could not do.

11:28Chris Maguire:I'm going to ask you about the background to that business. if I may was the deal size 15 million was that right for Surtis yeah yeah there's something you spoke about because after you left Surtis you did a bit of angel investing yeah and we spoke off air and you said it didn't go particularly well and actually you made two conclusions one was actually that you were the best return on investment so why wouldn't you put your money on you and the second was that you look for the eye of the tiger in the companies you invest in or the people you found business with because I understand but just explain what you mean by that yeah I mean obviously the selling to um selling to certus was financially beneficial um and you know and this is quite a well-trodden path I think for entrepreneurs where they look then to reinvest and you look you are looking also to reinvest in the next generation of the things but you do want to return on it we're not not giving away money for for free of it and you know obviously you start to get approached a lot from what what you've done um and would you look at this business would you look at this idea and I started doing it um to be honest I suppose it's like a lot of things you start looking at investments it's it's probably not my bag it's not something that I was very good at doing well i began to learn from it very well um the things i have learned is is if i do invest in something i tend to invest in something i actually understand and i know about in in the sector as soon as i start moving outside my my knowledge get my my sphere of knowledge that's when it tends to go horribly horribly wrong but you didn't invest in like avocado farms no no um But what I found was over time was that some of the people, some of the things that I've invested in, I did think was good ideas and did have good, you know, I felt had good potential and good traction.

13:40But those businesses over time didn't make it. And I found, you know, a couple of times that the entrepreneurs, they gave up. and so much of it is that you have to have so much I think determination grit and tenacity about you I mean certus we nearly went bankrupt twice doing it and that was because we were so far ahead of the market in clouds remember this is like 2010 we were two years ahead of the market we never really got traction to the back end of 2012 that's a long time not to be earning proper of money you know and and being able to survive that but you've got to find a way through it and I think all about entrepreneurship and running a business is part of the challenge is you have to find the way and and it's the rocky moment isn't it you know life will beat you down it will I don't know why at times we do this but you know the only person that's going to pick you up off the floor is you it's not someone else it's you and you've got to have that about you and when I looked at that and I look at people and I look at the capital I do have available to be honest the best returns in me so I kind of hold back these days from doing it and I'd rather invest in me because I can control myself I know myself I know you know the drive still there to do it and it and it's just the way I've learned and okay if I do things okay not everything I do works out but I can accept that it's a mentality thing and I do look I think a lot of early stage investing is you're looking at the you're really looking into the people and you're really looking into the people because you're saying when this really gets tough and it will are you going to stick it out are you really really going to stick it and ride it out because it does and that's the way it So it's just something I've learned and I've come across.

15:38So you set up DeNovo Solutions, which is another similar business, digital transformation, but with a technology background. Do you want to just talk about where that business is up to? Well, as I said, when we came back, and it's just been going five years, so I suppose it's still a young business. It's literally just finishing its fifth year. But to give you some idea, it's two and a half times the size of Surtis now. so it's a lot lot bigger um you know we describe it as a technology company because it is it's not just a professional services firm consultancy um it's far more than that it's got product we ipr we do a lot of using our ip to productize it so we we look to create passive income streams and we do that by creating digital blueprints for given industries so you try and get a sas model approach going we have a managed services so we look to reinvent managed services using the new the technology that's now available um so much about managed services falls apart because suppliers aren't transparent with the client and the client's saying i'm paying you this money where's it actually going so we've we've addressed that so we we can provide complete transparency of services but that creates recurring revenue streams everybody likes a recurring revenue stream um from from there and then of course we do have the professional services element of the consultancy and the implementation and then the last thing we're doing or the newest thing is now people are coming to us and I think it's the nature of where businesses are today that there is quite a lot of people businesses out there or organizations that actually can't digitally transform their back office they they just can't do it it's not that they want to do it and it's not that they have got they've found the capital to do it they just physically can't do it and then we found we said right well if we go back to an old concept of business process outsourcing but could we now you recreate that model using things like ai um using the technology and the blueprints we created and the managed services and create create a new service proposition and we'll run the systems for you and therefore by doing that we digitally transform you so it's it's just a different way of looking at it so it's it's quite multifaceted really you're based in wales yeah but that's down to your wife natalie isn't it a lot a lot of it stands by wife natalie but that program the first program with certus the print was the prison service and newport which is probably not on everybody's place to visit is probably the centre of cloud because Newport was where we built the first one of the first government shared service centres for the prison service 20 years ago so that's what took me to Wales and the ONS which was the first implementation certus did of Oracle Cloud is literally a thousand meters around the corner from the shared services.

18:43Chris Maguire:When you sold concertos and you're kicking your heels for the uh legal restrictions yeah you said to your missus you said i think about setting up a business i think she was desperate to get you out of the house yeah and she said yes on one condition you moved back to wales yeah and then best decision you ever made absolutely i think the the conversation went more more like you need to get a job you need to do something and I said who the hell is going to employ me can I do another business so I mean DeNovo is my fourth business so three are four I've been involved in three I've founded and taken for and taken through and DeNovo is definitely you know potential still has more potential than the others all the others combined but um yeah it was that she she wanted to go back for family reasons um but i had been looking for wales at wales for 20 years and i could understand the desire the ambition of the welsh government needing to move the economy from tourism agriculture heavy industry obviously tartar steel last steel work as we know it has closed last year um and they wanted to move it into the modern world effectively you know high-tech digital um you know digital digital fintech businesses that ensure tech admiral and all its spin-offs come from from cardiff great success stories but they wanted to move the economy into that direction and that takes like 20 years to do you know if if you can do it at all But to be fair, they wanted to start the journey.

20:25And a third of the people that were in Surters were from Wales because of our relationship with Wales. So we could see there was an untapped talent pool. And of course, Brexit's never really helped any of us in the talent side. So the attitude, my attitude has always been, well, we can sit and moan about it forever. or we have to find ways of getting the next generation into technology and we've got to build that skill and capability up. And the Welsh Government has the most amazing graduate apprenticeship programme and it's so topical right now with student loans. It doesn't happen in Wales if you go into tech because you come and be an employee, we're the sponsor, they're employed by us, the apprentices, and we start them off at the bottom, the minimum wage, which is I would say is not so minimum these days you know you know a person probably costs us 28 000 just to employ them if you're right at the bottom you know so it's a big investment for

21:25Chris Maguire:a size of business like us my first salary I was very well paid my basic was about six and a half grand and my I had shift allowance which took me to 11 000 in 1987 so that's exceptional Mine was 5, 8, 8, 6 a year. Less than 6 grand a year. I bet you were one of you. Mine was 6, but the week before I joined, it went up to 6.5. Yeah. Honestly, I think this podcast is going to bring back memories. So you've grown De Novo Solutions now to 12 million of turnover, and you're employing 140 people across Wales, India, and across the UK. so what's the plan though for that business? I think there's incredible amounts of growth still left in it we can see a path to£50 million worth of revenue a year and a lot of that is though not just increasing the headcount it's actually leveraging the new technology like AI through these new service propositions like the BPO payroll services so as I said 20 years ago we needed a big building with 500 people in it but we didn't have that kind of technology available today we need a smaller building I don't really want 500 people in it but 20 people but we can use all the technology to create I suppose digital experiences digital conversations before you need the expertise to come in and provide still brilliant customer service we don't want to go into the sorry bt bt call centers press one two and three and be find yourself in wherever we want to remove that kind of experience so i think the technology that's available today has incredible amounts of you know opportunity for us all to being able to leverage it in some way to to create new service propositions i mean ai right yeah just ai but also adaptive analytics you know it's it's understanding what's actually going on inside a business and then acting on it you still you've still got to do that i suppose if you take it to extreme you can understand what's going on inside a business and then you can get the ai to act on it but um i think there's still a role for human intervention here i don't think you can take the human experience out of it altogether but i think by using the people that we've got and harnessing those technologies that creates new service propositions and creates revenue streams and value you know moving forward so it's a modern a modern take maybe on an old recipe if you want to look at it that way you're completely bootstrapped that's the amazing thing you've mentioned the four businesses you've been involved in and i'm a tech journalist i'm reporting all the time with businesses that have raised millions of quid you've not raised any um i bet that's not because you're short of offers no um we i mean we're lucky as i said with certus we i mean that was so pioneering that was so risky at the top of the risk profile because we just talk about cloud it just exists today it didn't back then everybody was very apprehensive about it you know even even looking at it so you know we know what it's like to be within six hours of having to close a business down you do not want to be in that place but obviously we did a successful financial exit so we could fund an over ourselves which we did and I do believe though generally again part of the journey is you have to find a way of funding your ideas I don't believe just going out raising loads of money is naturally the answer there is a point in time you need to do that depending on what where you want to go but that's not necessarily the first default position and i see too many people personally the first the first thing they do is they want to go out and raise a million pound and then they'll be back next year wanting to raise another million pound it's like it's it's not the way to do it i think you've got to you know find part of it is finding the way and finding the way of how you can use capital i mean we grow de novo a lot of it i'm okay perhaps we're in a more privileged position now you can say it's a privileged position i think we've earned our stripes of it we do use debt capital so we use why should we give away equity we'll use the debt capital so we can leverage that and we do because of our track record we had people the banks will back us so we're in a we're in a more fortunate position but it doesn't mean that you can't it doesn't excuse you from being highly disciplined you know cash is king every day and and you know you know you you live and die by those things so so you're 57 now um what what's the what's the end game well i still feel i'm really i've had at least a life i think I think that's probably working with young people, though.

26:38I don't understand them, but they do make me laugh at times. But, no, I feel really good. I don't want to be in a situation where I'm sitting back at home again. You know, that wasn't good for two years. And I put a lot of weight on as well. Can I identify with that? Yeah, so for me, there's a lot of fire in my belly. The eye of the tiger's still there. There's lots of things I still want to do. I think the way AI is and the new technology is developing is just creating more opportunities really that can be harnessed. So I think that's really good. And I think, you know, a key part of what we've done is what we're doing with Denova is we're, in a way, we're trying to build a positive legacy down in Wales because we can get more people into work down there with highly skilled jobs.

27:30And we feel that's something that's worth doing. and yeah we'll make money it's fine but there's a lot of things we can do you know to create wealth in lots of different ways not necessarily financial by giving opportunities to other people that may not necessarily would have had those kind of opportunities so for us there's there's lots to

27:52Chris Maguire:do so you said when you started certis you started it up with a view that you knew you were going to sell it yeah so it was packaged in a way that when somebody wanted to buy it it was ready yeah de novo is that the same uh i think it's i think i think what's driving it is different it's it's just different different perspective from it um don't get me wrong if somebody walked in and with a very large number on the table i think we would all look at it and go well perhaps but we we don't have that purpose with certus was designed from the outset to be sold it was it was specifically designed and it was designed because we knew the large tech companies the large systems integrators they don't actually invest in new skills and new technology they don't do it they're there that's not saying they don't have good people they have plenty of good people but corporately they're constrained so they become very predictable in what they do so i mean when i compete against them i could write their bids for them because i know exactly what they're going to do and exactly how they're going to price it because that's how those organizations work and that creates opportunity so predictability creates opportunity there's your there's that's a big phrase for us and we know exactly how they're going to pitch it and we know therefore we know how to compete against them from from from that perspective so we knew that in when we was building certus in five six years time they won't spend five six years trying to build what we did they won't go through the pain you know all the late nights the we haven't got any money and all the woes they don't do that but suddenly they have FOMO fear of missing out and the quickest way to deal with it is by someone and there you are all pre-packaged and that that that's that's actually again that's that's a pretty tried business model really um so that's certus you could say accenture acquired it or somebody else was going to acquire it i would say that we sold it because it was designed to be sold de novo though he has very similar characteristics that isn't really the end game of us it's it's it's evolved itself on this journey that we've been on and we don't think really we want to end back up where we were the last time so for us and because we can grow it there's still the challenge of growing it so so much of this is not competing with others it's competing with yourselves can we do this can we get it to that point and and that's what drives us really so I think there's there's a lot more to go to it yet that's not to say that we may not look at bringing in external capital or something to accelerate the growth but the difference is we want to be in control of it what's lovely just talking to you we're going to finish there for part one it's just when you talk about de novo the your eyes light up you love it you know and that's what's great you know you're not uh not going through the motions far from it so mark massive thanks for coming in today and uh for sharing your story with the dealmaker and cup that's all for part one

31:08Chris Maguire:Well, welcome back to the second half of the Dealmaker Uncut podcast. We've interviewed Mark Sweeney, CEO of DeNovo Solutions, one of the most highly rated entrepreneurs actually in the UK, regularly figures in those sorts of lists. Jonathan, what did you think? So obviously the first business that he set up was cutting edge at the time and he built that up and sold it. And that was almost the focus of the business. But talking to him now, he's obviously really passionate about what he's doing for the apprentice scheme and to develop the business in Wales. And we were talking outside the pod as well.

31:48He is really passionate about developing Wales. So, yeah, just a really interesting story.

31:56Chris Maguire:Yeah, I think when we do the Dealmaker podcast, we think, what are the component parts that make the podcast interesting, hopefully, to our listeners? and our viewers, and obviously talking about deals, talking about investment raises, talking about angel investment, talking about exits, whatever it might be. I think the interesting thing about Mark is that he gets approached every week with corporate finance people wanting to invest in his business, but he turns it all down. He knows what he wants, but at the age of 57, he feels like his best years are ahead of him, which is inspirational stuff as far as I'm concerned.

32:31Chris Maguire:The final part of the show is when I ask you, Jonathan, some questions where you lean into your 38 years experience in corporate finance and the first question is from a regular listener to the podcast and a it's a really good question actually she says jonathan i listen to every episode of the dealmaker uncut podcast so thank you to you but where do you go to find buyers for the companies that you're acting on behalf of well i suppose um the every business has a different a different buyer obviously the depends really what sector you're in And we have loads of people who are deeply involved in specific sectors.

33:07And normally, when somebody comes in to talk to us about selling the business, one of the first things we do, we bring the sector team in and we look really carefully. And we normally know the most obvious buyers just because of our activities in the sector. Most of our sector guys will know the CEOs or the most likely buyers. but then also you know as a and m as an organization is a four and a half billion dollar turnover global business um half of that is in the u.s and so very often where there's u.s trade buyers for a business in in sectors um you know the problem there's you know there's always somebody somewhere in the firm that that will know the the most the obvious buyers or even some of the less obvious buyers so each case is different but um you know and you know obviously we do a whole load of research as well but but usually our sector guys know the buyers already okay next

34:06Chris Maguire:question is from another regular listener uh they're looking to sell their business and they've asked this question i've been offered a four times multiple for my business but i don't think this is a true reflection of the value how can i increase the multiple so ultimately a business is worth what a buyer will pay for it. The theoretical valuation of a business is the present value of the future cash flows that it will generate. So people apply a multiple to an earnings figure really as an approximation to that net present value calculation, the amount of cash the business is going to generate.

34:43How do you make a multiple higher? Well, run a competitive process. The competitive tension drives higher values. but improving the quality of the business, the quality of the management team improving the quality of earnings, contracted earnings is generally much more valuable than one-off earnings and developing a business proposition in a sector where growth is likely I mean effectively the more likely a business is to grow the higher its value will be so there's some simple ways really to improve the value of the business but each sector is different, has different prospects but prepare thoroughly for a process and then run a competitive process

35:31Chris Maguire:Thank you very much, final question Jonathan, this comes from Chris McGuire, big fan of your work entrepreneur Paul Simkis has just sold Rochdale based Simkis Group to United Infrastructure I interviewed him and he said he did it because of Rachel Reeves's changes to inheritance tax and believes other SMEs will follow suit. I've been contacted by other SMEs who've already followed suit. Do you think you sing a lot of this stuff and do you think he's right? Well, there are a number of private businesses now where if they've got significant individual shareholders, the changes to inheritance tax will mean that when they die a significant inheritance tax bill will be payable and often the only way that that can be paid is by raising money in the business concerned and if you've got two or three shareholders and one of them needs to fund an inheritance tax bill you can end up having to pay out a lot of money and often more money than the debt capacity of a business, for example.

36:37So quite a lot of entrepreneurs who are in their twilight years are starting to think they're going to have to sell the business to avoid the business being burdened with an inheritance tax bill. So it's very common at the moment.

36:51Chris Maguire:OK, thanks very much for those questions. Thanks very much to you, Jonathan, for answering them. That's all for this episode of the Dealmaker Uncut podcast with Alvarez and Marcel. thank you to you Jonathan thanks Chris yeah and don't forget to subscribe to the podcast tell your friends and family and follow us on social media my name as always is Chris Maguire