Supporting our Partner Companies with Veteran Advice
Posted by | December 22, 2011
At Safeguard Scientifics, we offer our partner companies quality resources to promote their growth and help them recruit strong management teams for their future. We currently have 16 partner companies, and we strive to provide each of them with operational support services to help build long-term value.
The team at Safeguard has significant operational experience—they’re not giving advice based on case studies read in business school. Rather, their advice to partner company executives is based on years of experience, and that’s a priceless commodity for a growing business. Our team has decades of experience in life sciences and technology industries as entrepreneurs, board members, financiers, managers and service professionals, building and operating businesses, and achieving returns for investors. We understand the challenges that young companies face.
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” At Safeguard, we teach our partner companies how to fish, and in turn, help them to grow their business.
Building a market-leader demands a clear operational focus and a patient capital approach. If you look at the Safeguard team, you’ll see a collection of complementary skills and a variety of experiences that are shared with each of our partner companies to help them continue their trajectory of successful growth. It’s a pillar of Safeguard Scientifics today.
Case Study: Clarient
One example of Safeguard’s operational expertise in action is Clarient, which was acquired by GE Healthcare in December 2010.
Clarient was originally founded in 1996 as MicroVision Medical Systems, later known as ChromaVision, which developed and manufactured digital microscopes that would help diagnose various diseases and medical conditions by analyzing tissue and blood samples.
When I joined Safeguard in 2005, Clarient, then known as ChromaVision Medical Systems, was failing because its market niche was too small to scale a real business.
Under the leadership of CEO Ron Andrews and with direction from Safeguard’s current management team, the company was repositioned and rebranded as Clarient. Refocusing the business on cancer diagnostic services, Clarient sold its ACIS® and Trestle® Instrument Systems business assets and related intellectual property to Carl Zeiss MicroImaging, completing its evolution from an equipment sales model to a diagnostic services model. As a result of its repositioning, Clarient has grown its revenues tenfold, turned profitable and grew its market cap by more than $430 million, based upon GE Healthcare’s acquisition price of $587 million.
Throughout Clarient’s transformation, Safeguard worked as an active partner to support Clarient’s growth. Safeguard’s support has taken many forms, including: initial and follow-on rounds of equity capital, mezzanine debt facilities, lines of credit guarantees, executive management recruitment, sales and marketing expansion, facilities project management, strategic communications and partnerships.
In addition to the above, Safeguard facilitated a private placement of $40 million in Clarient convertible preferred stock by Oak Investment Partners during the first quarter 2009. The transaction allowed Clarient to retire all of its outstanding debt except for receivable financing, reduce annual interest expense and fees, add working capital to drive growth, and propel the company toward net income. The effect of the private placement, combined with a subsequent public sale of a portion of Safeguard’s holdings in Clarient for net proceeds of $61.3 million, reduced Safeguard’s stake in Clarient to approximately 28% outstanding shares on an as-converted basis, down from 60% at year-end 2008.
Clarient’s growth from 2005 – 2010 and the value inherent in GE Healthcare’s acquisition illustrated the power of Safeguard’s platform to provide capital as well as strategic and operational support to its partner companies. But ultimately the credit goes to Ron Andrews and his team for building an incredible company, expanding its cancer diagnostic services and supplementing that business with novel markers to provide greater scope and higher intellectual content for its customers. The complementary diagnostic capabilities at Clarient and GE Healthcare will continue to deliver targeted cancer diagnostics to patients, ultimately improving patient care and reducing healthcare costs.
