Building a compliance powerhouse with Celnor

Speaker A: Hello and welcome to Inflection Point, the podcast that explores those crucial moments in a company's journey that change the trajectory of success. Through conversations with business founders and entrepreneurs, we'll look at what those moments are and how to recognise and harness them. In today's episode, we dive into Sellnor, a buy and build platform transforming the compliance market.

Speaker B: I was pretty confident that if I created a best of breed long term home for small and medium sized compliance businesses that that would be successful.

Speaker C: We were able to back his vision to build a group that entrepreneurs want to join.

Speaker A: I'm Tim Smallbone and in my 20 years as a partner at Inflection, I've been lucky enough to witness many of those moments that sit behind every success story. Celnore was created by its founder Simon Parrington with inflection in 2023 to bring together specialists across a range of testing, inspection and certification services. Backed by our enterprise fund, Cellnor launched with three acquisitions on day one and has gone on to complete nearly 40 more, making it one of the most active buy and build stories across our business services portfolio. I'm delighted Simon joins me today alongside Dominic Clark who is responsible for Inflection's investment in the business and who sits on the board. Welcome to you both and thanks for joining me. Thank you Simon, just tell me first of all a little bit, what does Sellnall do today?

Speaker B: So we provide uh, testing, inspection, certification and compliance services across the built environment, assets and infrastructure lifecycle. That uh, normally means we're providing some sort of mission critical uh, regulatory driven uh, service that's really important to our customers. So it might be uh, helping with uh, a property development project with planning regulations, building compliance, materials testing, uh, geotechnical surveying or it could be uh, you know, a hospitality venue or a uh, commercial property where there's a significant requirement for uh, inspection activities to keep a safe environment for employees and the public that are using that building.

Speaker A: So this is of course buildings, commercial buildings typically and as well as infrastructure.

Speaker B: Absolutely. Yep. So we work with uh, uh, the utilities, uh, a lot of transport, infrastructure,

Speaker A: all sorts of different infrastructure assets. So what about yourself? So what was your background? What were you doing originally?

Speaker B: Um, Sellnor is the third compliance based business that I've been fortunate enough to lead. My first business was uh, uh, an agricultural environmental focused inspection and compliance business. Uh we helped uh, farmers and landowners with all the uh, data that they require to be uh, both compliant but also uh, efficient in their businesses essentially soil testing, soil and uh, uh, water and slurry. Anything that comes off the kind of land. And uh, I then moved into a laboratory business that supported a similar sector where we ran uh, eight laboratories and a couple of sampling companies ran it for about three and a half years.

Speaker A: That's water and soil, was it? Rather than medical or any other sort of lab?

Speaker B: Absolutely.

Speaker A: Yeah. Yeah. Okay. And so that was. So you were leading those businesses.

Speaker C: Correct.

Speaker A: You hadn't a career doing that. So what on earth gave you the idea to create Sailnor?

Speaker B: So after the sale of my uh, second company, you know, I was kind of thinking well what should I do next? And I had this kind of theory that if I took the best of everything I'd seen in my career in terms of uh, growth and modernization and integration of businesses, uh, after acquisition I felt I could build a really good long term home for compliance focused businesses. And that was really the principle of Salnor is, you know, provide uh, an environment where we have uh, world class systems, fantastic central enablement team to support the businesses, um, and then find some great, good and very good companies to come and join us and grow together and serve a common shared customer.

Speaker A: So you'd had some experience yourself of running testing and certification businesses but interestingly you'd seen both those businesses be sold and so you were the managing director, the CEO of those business being sold. And it was that experience that made you think about how you could do it better.

Speaker B: Absolutely. Yeah. Yeah, I saw, you know, I saw what I thought good looked like and I also in my second business we acquired seven companies in about three years. So I'd acquired a few companies and I was pretty confident that if I created a sort of a best of breed long term home for um, for small and medium sized uh, compliance businesses that that would be successful. And what we find now is that many, many of our um, companies that join us are, they're off market, uh, private transactions. And uh, it's not so much that the business is for sale, it's more a case. It's looking for the right home to support its growth. And that's what we've deliberately built Sellnor from day one to be that fantastic home.

Speaker A: Interesting. So the genesis was much your experience of the deals that you were involved with both as seller and as buyer. So Dom, the testing inspection market, what was of interest to U.S. inflections had

Speaker C: a decade plus experience investing in that space. Alchemist Kwood which Simon ran after we sold it Fenner bes. And I think the thing we kept coming back to as we continue to look at the market was just how fragmented These markets remained and you've really got thousands of businesses, very specialist businesses of often founder led. And they're doing really great things. They're doing things that customers need. That's driven by a regulatory demand so that demand doesn't fall away, it is mandated. But a lot of these businesses are subscale, they can't invest in technology, they're struggling to provide the breadth of services that clients increasingly need. And they kind of hit a stage, a lot of these businesses where they need a platform to take it on to the, to the next stage. And so when Simon presented us with the opportunity to back him, to take the best of everything he's experienced in his career, that really aligned with what we were seeing in the market as there being a gap for a platform at a time when regulation wasn't going away. It was getting harder and harder and harder. And we felt like there was an opportunity to build a platform that would help attract entrepreneurial founders to continue to serve their clients, to continue to build teams and continue to sort of provide really, really important services.

Speaker A: So you referenced that it was regulatory driven. Just tell me what does that mean?

Speaker C: If you think about the sort of services that we do at Sellnor, these touch every sort of aspect of the built environment. As Simon said, whether you're dealing with that planning stage, the building phase or the occupancy stage, what we refer to as in life. And there are a series of things that stakeholders at each stage of that built environment need to procure. It's testing, people are safe, testing that, you know, soil is being handled appropriately, uh, ensuring that the environment is being considered as you build a building. And so this isn't a discretionary spend, this is regulatory driven. It's required by law and they are the services that we find really attractive in tick.

Speaker A: And why was this market so fragmented in terms of how it's supplied?

Speaker B: It's a huge market Tim. And I think Dom's described a number of platforms that have already existed in the sector. But it's so broad. Almost every industry, uh, you know, every sector has its own compliance, um, or uh, certification requirements, which means there are just a huge number of providers. Um, and as I said, you know, it's partly fragmented because you know there are businesses that they're not even technically for sale. They're relatively, it might be, um, might be 10, 15 year old company and uh, you know, 60, 70 colleagues and uh, they've just reached a stage where someone coming in alongside the management team to support growth and add some uh, kind of world class systems. And that type of enablement that we provide is just the right time for the business owner.

Speaker A: Managed businesses, relationship driven businesses of a certain scale, probably regional businesses. And so that was the ingredients that you both started with. So how did you come together to start from scratch? Because it's a very different business model to one that we normally back.

Speaker C: When you've done these things enough, whether it's in the tick space with all of the fabulous sort of success inflections and that space, or across other sectors, uh, with other opportunities, there was certainly an appreciation at Inflection that starting with a blank sheet of paper has quite significant advantages. If you have a clear idea of what you want to build, you're not inheriting a set of processes, a culture which then every other business might feel like they're being absorbed into and have to conform to. We were able with Simon, to back his vision to build a group that entrepreneurs want to join that they don't feel like they are becoming sort of a small cog in a large machine. Simon has always said every business that joins sell nor is as important as the prior one, as important as the next one. And that really was the benefit of starting from nothing.

Speaker A: I can certainly see the attractions from our side of the fence. So Simon, you were, you had an idea, you had a vision for what you could achieve. Why did you run with us?

Speaker B: As Dom's mentioned, my previous role was uh, the MD at Kwood, uh, Scientific. You'd invested in Kwood before my time. And uh, so I took a reference from colleagues that were involved and they gave a really strong recommendation for the work that you'd done, um, you know, kind of uh, growing and modernizing that business during um, your investment. So that immediately felt like a good endorsement, you know. And uh, I think I had a couple of early meetings with uh, the team and it just felt like a really good fit. I was really clear on what I thought we could build together. And I felt that Inflection understood the market, were well resourced and really importantly, uh, well connected. Uh, in the first six months we signed up our first five or six companies to join us. Um, and that was before we acquired a company or launched our website. So we basically didn't exist.

Speaker A: So you had some backed up ready for when you had the capital?

Speaker B: Exactly, yeah. Yeah. So, yeah. So Inflection and myself had agreed that we would work together, but we still had that first phase of finding the first few businesses and to be able to go out and say not so much to individual Businesses who may not have heard of inflection, but when they go and speak to their lawyer or their accountant and say, oh these guys, this guy doesn't have a website, never heard of it, has he got any money? Exactly. And then they can go to go and Google inflection and they probably come across you guys and your reputation over the years. So that was really, that was really important in that first year. And even things like getting bank accounts sorted and that type of stuff, just really strong. We also had fantastic support from um, your debt team. It's been exactly what we needed.

Speaker A: So the first deal, getting it done, big moment.

Speaker B: It was a really big moment. Yeah, absolutely. And I think uh, we've moved pretty quickly. We have uh, 42 member companies now, uh, a number of others joining us over the next few months. So it's been a busy time. So we don't stop that often and think, oh, this is, ah, look how many companies we've got. It's not something we're regularly thinking about. But yeah, the first two or three deals together, they're really, really important to us. I'll always kind of remember, uh, those teams joining us and those businesses are still flourishing today. And uh, in fact we recently moved into a slightly larger office for our central team. And uh, we named the meeting rooms after the project names for the first few deals to sort of commemorate history. Exactly. Because as I said, we very much feel this is a great long term business that we're building here and therefore I want key parts of the history to be remembered.

Speaker A: One of the big challenges here, Dom M. It was normally we start off with a platform business and add other businesses on here. We had no platform so you had to build all the infrastructure from scratch. Yes.

Speaker C: And I think uh, as a testament to that, Simon was clear and we were aligned with Simon, that ultimately what we're trying to do here is build a portfolio of complementary services that customers demand. And actually you know, we're starting to see some really awesome sort of collaboration across the portfolio. In order to do that, Simon knew that he wanted to buy and invest in specialists in their respective niches in their respective geographies. And so all of that meant the priority was to get the M M and A engine running, the opportunity to sort of say, how do we run at multiple things without the wheels falling off? And so I think employee number one was our current head of M and a and Sam McCarthy. And you know, Sam now leads a team of uh, eight or so folk. And so there was no infrastructure, but there was an early recognition that if that's our end game, that's where we want to be in 3, 4, 5 years time. How do we back solve that we need to build that infrastructure. I would then say, you know, coupled with that uh, are uh, two other really important things. That reputation point that Simon already alluded to. Simon had a good reputation with founders uh, earlier parts of his career he'd started to build that pipeline, that black book you might say of opportunities. Clearly inflection is well known with intermediaries in particular. But then what we're also starting to see, which is just fantastic is our entrepreneurs that we've invested in when they are speaking to their peers they tell people they were treated well, their teams were treated well and we have delivered on the series of promises about what we could do to help them grow their businesses.

Speaker A: So presumably they cross refer uh, they talk to previous people who've sold us

Speaker C: previous brands in markets as fragmented as this. Word travels. Yeah, travels quickly. And once you get that flywheel of reputation the pipeline kind of builds itself, you know just in terms of those things. And the final thing I would add in terms of key, key things is discipline. And just because we now have a sort of a well oiled M and a machine and we can move quickly and we can process things quickly and efficiently, it doesn't mean we're indiscriminate. And and I think that discipline. We're very clear on what a Sellnor business is and what it isn't and we've got clear sort of criteria that's been sort of fine tuned over the last few years.

Speaker A: There's a perfect segue. You've referred to a well oiled machine and how disciplined you are. But the obvious question Sam is 40 plus deals in MHM two and a half years. I mean it's phenomenal how on earth you've managed to go so fast.

Speaker B: I mean we do have a really great team, genuinely uh, ambitious, professional and really focused on both finding great companies to partner with and also supporting them on their journey. And I think as we sort of mentioned our team, the enablement team is uh, purpose built. It's only there to find good businesses and support them. It has no other purpose. And so we don't have that kind of internal battle going on where people in the kind of center are trying to make all the businesses look the same or behave the same because we're only there to optimize the businesses. We have obviously very professional standards for recruitment and for bids and tenders. We bring A whole lot of new capabilities to some of these businesses, but it's still very much focused on the business pulling the support they need rather than kind of like a one size fits all. And we also do a huge amount for the teams. So we run a whole range of training programs. Leadership development program, management development program, sales development program. So I'm really keen that everybody in a business that joins us over time sees some benefit of joining the group. And likewise, obviously I talk to a lot of our customers and customers really like it because they can see that they get the agility and service that they're used to from a small, medium sized, privately owned business. But they also then have the scale and resources of a larger group. So they almost get the best of both worlds as well.

Speaker A: You've referenced Sam, who came in to run your M and A team. How did you build the rest of the team?

Speaker B: As I said, we're really fortunate with the team that I have around me. Uh, and actually Tim, this is something where we uh, got huge support from, uh, inflections. We spoke to Freddie and your uh, kind of people team and uh, she was really helpful in just thinking about how do we kind of build out our senior team. And this was after we've been going for about six months and we were just at that point where thinking, okay, we are going to more than deliver what we thought we were going to deliver. And uh, we need to make sure we've got the right team in place at a senior level. So Freddie sat down with us and worked with myself and the deal team to really think about what are the key pieces that we need and who are the right partners to help us find those. So we found an absolutely fantastic, uh, chief people officer, Anoushka. She really helps me with that whole kind of culture piece. And then, uh, we also have our chief financial officer, Gillian. And again these both recruited with support from uh, Inflection's team, uh, John Fowler, our chief operating officer, just to give three examples, because we do have a successful wider senior team, really carefully planned and then found the right people and they're absolutely incredible contributors to the journey.

Speaker A: So for any business that joins you, what's the story? What's the onboarding?

Speaker B: The key thing for us is enabling the business and showing positive, uh, contributions as soon as we can. So a couple of things that normally happen really quickly, um, is that we um, get the business onto our um, recruitment platform and pretty much immediately our recruitment team will start helping the um, new business fill any vacancies. Many of Our businesses, there's plenty of demand for their services, they just need the people and then our marketing team work with the business and often will be upgrading their digital identity, adding the kind of um, the sellnor kind of branding to their website, that type of thing. And then normally there's some degree of um, lead generation activity to improve sales inquiry levels. So almost immediately you're in 1 people,

Speaker A: 2 sales, on you go. Yeah. What one thing would you say to a founder, owns his business thinking about what to do next? What one thing would you say to him about coming to join a business like ours? What's private equity backed for me?

Speaker B: If you're joining us, you're going to still run your business but you're going to be part of a group. So you need to have that mindset that you're willing to work with others and you're open minded to, to ideas and um, kind of sharing uh, customers. So um, yeah, it's more of a mindset shift that often you've been doing your own thing for 10, 15 years and now you're going to be part of a group and you've got you know, a lot of day to day autonomy but you're still, you're part of a group and you've got a huge opportunity to work with other businesses and to get the best out of my team. So uh, you've got to make it a new world. Exactly. You've got to think to yourself, am I, is that what I want or do I want to just sell my business and sail off into the sunset? And if you're the latter, that's not us. But there are plenty of buyers out there.

Speaker C: I would say do your homework. Not all private equity firms are the same, not all platforms are the same. And the questions I'd encourage founders to ask are, does the group understand my market? Will my team be looked after? Uh, and I guess critically will I still feel like I'm running my business on Monday morning, but just with a war chest of capability that's going to enable me to, to grow or manage my succession.

Speaker A: When we set off, how purist were we in terms of what we're looking to do? Clearly looking for businesses that grow with good margins, that were broadly in compliance. But how purist were you very focused on a particular niche or.

Speaker B: Yeah, wider. Every now and then people ask me that question and I've dug out the initial presentation that I gave in flexion uh, early on and what we've built is very closely aligned to what we set out to build. So to do that we couldn't necessarily buy every piece in the perfect order order. So sometimes we had to buy, you know, a piece that wasn't logical and then we added the bits in between what we had and that piece to make it logical. But as we stand today, the group and our uh, kind of four main divisions has a very coherent feel to it and flows really end to end across the property, asset and infrastructure life, uh, cycle and all the compliance needs that exist along that cycle. So if you wait for perfection, you could have a long wait.

Speaker A: Yeah. And Dom, it was originally a UK thesis and yet it's already gone beyond the uk.

Speaker C: It has indeed. We are now a global group. So we have recently, in the last 12 months we've gone to the sort of East Coast US and we've also gone into continental Europe. Those we are going to deploy a very similar playbook. So I think the end market dynamics are very, very similar. These markets regulate very similar things to the uk. Slightly different legislation, slightly different requirements, but it's broadly the same. And ultimately there is a playbook to replicate in terms of starting and then building out that sort of full service proposition. The US is an enormous market. Europe is multiple countries where crossing borders there are sort of complications that you need to help clients navigate. So it does feel like an incredibly. Both of those markets feel incredibly accessible for the Sellnor playbook.

Speaker A: Look, one of the things that you worry about as an investor backing a thesis uh, that is entirely M and a led is when we get there, are we going to have to pay a lot more to buy the target businesses? And yet we've always managed to do good deals, value accretive deals. But we're not the only people out there looking to do these deals. How have we managed to put off this trick?

Speaker B: We um, buy over 70% of our businesses, um, off market Tim. So we don't really compete that often in competitive processes. We have done on occasion, but we're careful with our investments. Uh, our teams together all work really hard to serve our customers and perform well on a monthly and quarterly basis. So we're careful in how we kind of redeploy our uh, money and make sure we add the right pieces at the right time and at the right price. And uh, yeah, it just takes some discipline. There will always be other buyers for assets. Uh, but I always kind of like to think that there are more than enough businesses out there that are looking for what we bring to the table and there are probably enough businesses out there for what other buyers uh, bring to the table as well. And uh, the package that we offer is quite difficult to replicate when we think about the whole, the enablement team, the resources that we have to acquire businesses and then the growth track record of businesses once they've joined us. And it is an M and A LED approach. But we shouldn't underestimate the organic growth story. Every business uh, has a growth kind of plan as part of our diligence process and then that's kind of kicks off promptly after acquisition. So that might be regional expansion. So a northern business starts to cover the south of the country. It could be a new service line, it could be digitization of the back office. There are a number of different projects. But the key thing for us is always having something that will drive growth that we've defined with the management team. It'll be their ideas, but with our strategic input and cash to drive it forward and make it happen. And quite often if you meet an entrepreneur of a 60 person, 70, 80, 100 person business, they'll always have those one or two things. I always wanted to do that. Which was just a bridge too far on their own.

Speaker A: So we do an enabler to help them to make. Absolutely, yeah, yeah. One of the tricks to putting together so many different businesses, a lot of them will have similar customers. Have you managed to crack the cross sell challenge?

Speaker B: We drive that in a number of ways. Our businesses work together within each other's supply chains. If I'm a geotechnical, uh, uh, testing and consulting business, um, I will have a need for laboratory services. So we have that capability in house. So we can kind of bring that spend in house and then we have a lot of customers that we share and uh, that's the kind of thing that's just increasing almost on a weekly basis. I get kind of like a whole lot of different weekly reports on this type of stuff and it just takes off. But for us we don't drive that by spreadsheets, we drive that by culture. So we do all of our events and all our communications and all of our training that it's all mixed cohorts from around the business. So people actually are working together because they know each other, they trust each other, uh, and they want to work together. Not because somebody from head office has sent them a spreadsheet saying can you please cross sell these hundred customers? So that's a really good, really important difference to our approach. And then we also professionalize that. Obviously every business has, we serve over 20,000 customers every year. So many of those are now spending with multiple business units. The key thing for us is um, that on top of that our bids and tenders team support um, the businesses going for larger procurement M processes and that's really difficult if you run a, a small medium sized business to spend your Sunday afternoon filling in a 30 question questionnaire to participate in some big procurement activity. It's just hard work. And you don't think your chances of success are very high. If you actually have a team of professionals that can help you do that, who've done it before, who have a success rate, you can help individual businesses with that. But we can also bring together multiple businesses with multiple capabilities that uh, are quite unique. Again we have some unique trying to

Speaker A: get the best out of the different businesses.

Speaker B: Absolutely, yeah.

Speaker A: Dom, whenever you do a deal you know it's a risk. Was there a moment where you thought this was working?

Speaker C: Yeah, I would say during the initial build out of the CellNow platform to move at pace and to uh, sort of have control over that inflection. Equity funded that, that process. I guess an enormous endorsement of Simon's work was when we financed the business with Ares that that involved you know, a full diligence process to support that moment. And these are very sensible people. And so for me seeing a lot of that come to fruition, that initial phase of the build out be solidified with a financing that for me was uh, a huge moment. And similarly watching the group go international. When we did our first acquisition in the US when we followed that up with our first and shortly very quickly afterwards second acquisition in Europe where you're starting to see the wings spread and the opportunities just sort of 5x in terms of where the business could go

Speaker A: and what next for Cell nor? You built 40 odd companies, what are you going to go and buy another 40 and another 40 after that? Well, what's the story from here?

Speaker B: So the last year we've um, put in some pretty major investments. Uh we've built out a business intelligence platform to help our teams uh, understand their customers better. Uh we have a group wide um, HR platform so everyone can manage their careers in, in one location. We have a group wide uh, recruitment platform so a lot of standardization of systems to really help our businesses and enable them to m move more quickly. Uh we've also added to our enablement team. So I actually anticipate over the next two or three years we'll actually be going a little faster. Um, and I'm excited to do that. I think over the last year we've really put in the foundations that we need to do that as we stand here.

Speaker A: Really mean it. You're going to go on again?

Speaker B: Absolutely, yeah. I mean, I always set out to build, you know, a really good long term business and that would be like a 10, 15, 20 year journey. And uh, you know, we obviously have the team in place to do that. We've made some investments that mean we can really, we, uh, can really push on now. We've pretty much delivered our original five year plan in just under three years. So, you know, we're, you know, we're really keen. You know, at our conference a couple of weeks ago, we shared our goal of, uh, being over 1 billion revenues by 2031. And I think that's.

Speaker A: Wow. Not short on ambition.

Speaker B: Well, I think it's very realistic with the quality of team and colleagues that we have.

Speaker A: You're the structure, you're the tools.

Speaker B: Absolutely, yeah.

Speaker A: It's an amazing story. Just putting it all together. You started with absolutely nothing, an idea, and just moved at so much pace to create an incredible group. Thank you for sharing with us.

Speaker B: Thank you, Sim.

Speaker A: Thanks.

Speaker C: Domestic. Thank you.

Speaker A: That's it for this episode. My thanks to Simon and Dom for joining me. Remember to subscribe to Inflection Point wherever you get your podcasts so you don't miss an episode. And of course, you can check out our previous installments too, including the story of Nodor, the sports manufacturing firm at the center of the world of darts. Thanks for listening.