Imagine someone told you they were going to invest $250,000 in an unknown business they’d seen advertised in the newspaper classifieds. Would you think they were incredibly foolish or very brave? Then suppose the business operates in a sector in which this person has no previous experience, and will be based in a country half way round the world. At this point, you might consider calling in the men with straight-jackets. But Paul Swinney is neither fool nor madman, despite turning his back on a successful career in finance and risking everything to buy into Tristel, the infection control products specialist that has since become a market leader in its sector.
‘I suppose merchant banking to infection control is a pretty unusual career progression,’ admits Swinney. After graduating with a business degree from Moorgate college in 1979, he carved out a career with Brown, Shipley & Co and went on to work for the European banking operations of Northwest Bank Minneapolis and Maryland National Bank in London. ‘But I grew tired of the power-hungry, class-conscious environment in the City,’ says Swinney, 47. ‘It was financially rewarding, of course, but I found it suffocating.’
‘At that time in the early 80s, I met a chap called Francisco Soler, known as ‘Pancho’. His company had an office next to ours in the London Stock Exchange building, where we dealt with South American loan syndication. Then the debt market crashed, borrowers defaulted and the business dried up, so Pancho moved to the States and started to invest in businesses.’
Swinney admits that in some respects the experienced business tycoon became his mentor. ‘Pancho was a enigmatic, wealthy entrepreneur and I was a young rooky trying to learn all I could,’ he muses. ‘Everyone in Pancho’s orbit was impressed by him, and I harboured a hope that one day we would be able to work together on a project that played to our strengths.’
No life of leisure
A group of Swinney’s former colleagues stayed in touch and went into business without him, launching an indoor tennis centre venture in 1984 with Pancho as chairman and major investor. This later became the prestigious Harbour Club in Chelsea, frequented by Princess Diana among other famous names, and was sold to Cannons Group for £27 million in 1998. ‘All this was going on around me, but at that time I had moved on from merchant banking to work for a shipping finance specialist,’ recalls Swinney. ‘The others ended up running a leisure company organising discos in venues around the world. They came to me for advice on acquisition deals, venture capital and so forth, and in the end I was invited to join the management team. It was my first taste of being at the heart of building a business.’
Sadly, the leisure venture went under within about two years, which Swinney attributes to falling demand and over-ambitious expansion: ‘And having been swept along by the potential, when it fell apart we each lost hundreds of thousands of pounds we’d invested. It was a grim time for all concerned.’
The right chemistry
Anyone else in this situation would probably, and understandably, have abandoned dreams of entrepreneurial success and returned to the secure income of a steady, well-paid job. Not Swinney. Once bitten but certainly not twice shy, he decided to look around for a fresh project, even though he lacked the cash to splash on a new venture.
‘A tiny advert in The Sunday Times business section caught the eye of a former colleague of mine, Peter Clarke. It said something like ‘patented portfolio of disinfection chemistry’, explained how the distribution business worked and gave a PO Box number. For some reason it struck a chord and instinct told us we were onto something, so we decided to meet the guy in Kent behind the business to find out more.’
The founder, Bruce Green, had secured the patent to a chlorine dioxide chemistry that destroys all types of bacteria, fungi and viruses. This chemical technology could then be employed in a sporicidal solution used in the disinfection of medical instruments, primarily flexible endoscopes made of plastics and polymers, which cannot be sterilised by heat.
Swinney and Clarke were far from chemistry experts, but they could see the logical route to market and evident demand in the healthcare sector.
‘For an upfront sum, we could purchase exclusive distribution rights for a particular geographical territory,’ explains Swinney, ‘so we asked, “What’s the biggest territory you have left?” It was North America and we practically agreed there and then to invest $250,000 to secure that area. I suppose I’ve always considered myself a risktaker, but that was one hell of a gamble!
‘It was a decision also motivated by despair,’ admits Swinney. ‘When you have nothing to lose you are more likely to take risks, but something about the business resonated with us and seemed a genuine opportunity not to be missed.’
Now Clarke and Swinney had the onerous task of raising the money to buy the rights. Their ex-colleagues and Pancho came to the rescue, ‘and Pancho’s brother-in-law was a surgeon in Miami,’ says Swinney, ‘so at last there was someone on board who had insight into the market. There were concerns about the toxicity of glutaraldehyde-based products predominantly used to disinfect instruments in hospitals at the time, and he agreed with us that the chlorine dioxide-based Tristel products offered a safer alternative.’
So in November 1993, the team set about establishing the customer base and distribution chain, commuting regularly back and forth between the UK and the States. For two years, they laid the foundation for the North American operation, but without a single sale of Tristel products being made. ‘It was a tough time – it really affected my personal life,’ Swinney concedes. ‘My wife Janice had to endure a lot and it was a struggle to support my family.’
Takeover Turning point
In 1998, the original founder of the UK business expressed a desire to sell the entire operation, so Swinney and the rest of the team took the momentous decision to buy the whole company. ‘Pancho and other investors stumped up the £750,000 needed, we rolled the dice again, bought out everyone around the world and came back to the UK. Looking back, it seems outrageous but it made sense to us because there was already a customer base of UK hospitals and established revenue streams, so we could hit the ground running.’
Since then, the company (rebranded Tristel after the product name) has fought with some big names in the sector, such as Johnson & Johnson, to become UK market leader. Tristel’s instrument disinfectants are now used in 60 per cent of all hospitals in the country and innovative product lines include surface and skin disinfectant solutions, foams and wipes. Profitable for four years, the business launched on AIM in June and turnover is currently £2 million.
Despite this impressive achievement, Swinney, now chief executive, is humble about success. ‘Luck has a lot to do with it,’ he asserts, ‘but I guess huge helpings of perseverance and sound judgement have made a difference, too.’
When asked how his experiences have coloured his views on risk-taking, he retorts, ‘it’s true I’ve made some life-changing decisions over the years that were very risky, but I’ve always made those choices with absolute commitment. Perhaps there’s a fine line between sheer stupidity and stubborn determination!’