Starting life as a physiotherapist and ending up the head of a private equity backed national business might seem like an unconventional journey, but David Sagar, Chief Executive of Work Health Group, makes it sound like a seamless one.
Sagar started his working life as a clinical physiotherapist but soon became interested in the broader issue of workplace health. After a stint at business school, he worked with a management consultancy that had a focus on healthcare and insurance.
When a client requested a review of the workplace rehabilitation industry, what Sagar found piqued his interest. “The client wanted to know what was good and what was bad about the industry and what I could see was that it was ripe for improvement,” he recalls.
That was 15 years ago, when Sagar could see a cottage industry ready for consolidation. In 2003, working with a number of partners, he launched IPAR as a workplace rehabilitation business offering services to reduce the impact of workplace injury and help those affected get back to work. Then, in 2006, Sagar took control of the business as managing director.
From the moment he stepped in at an operational level, Sagar set his sights on growth. Over the next decade, he pursued the vision of creating a national business. He knew being national was the key to success. “Our customers are big, generally national companies and they want to deal with the least number of suppliers they can to manage their services delivery,” he explains.
Seeing the opportunity
Then, in 2015, Nicholas Speer, a partner with Riverside, got in touch following a proactive industry review he had undertaken. Riverside is a global private equity firm with a major focus on healthcare so the fast-growing and well-regarded IPAR had come up on Speer’s radar – and he was thinking exactly the same way Sagar was about the industry.
“When we looked at the industry, we could see it was very fragmented, with only a handful of national players,” Speer says. “But we knew it would need to consolidate because the clients are national players and that meant there was an opportunity to bring our [merger and acquisition] expertise and capital to help the consolidation.”
The two men immediately clicked. Speer says: “We liked the team and it has an outstanding reputation for superior operational performance and customer outcomes. The model IPAR had developed was a winning formula, and it had been materially outgrowing the market for many years.”
Meanwhile, Sagar had already heard good things about Riverside from his personal contacts and the fact that Riverside was known in the sector through its investment in mlcoa – an independent medical examination business – gave him some comfort.
Furthermore, from the beginning, the private equity firm was very open. Riverside flew the IPAR team to its annual portfolio business conference (called the Riverside Leadership Summit) in Houston, Texas, and let them freely talk with people from the businesses in the room. "Everyone was overwhelmingly positive about the dealings they had with Riverside," Sagar recalls.
He could see that Riverside would bring a broad base of financial analysis and strategic disciplne to the table. “It would give us intellectual horsepower to share the thinking about what we should do with the business,” he says.
One of the first things Riverside did after investing was help Sagar put together a strong board; Sagar had been toying with the idea but Riverside’s involvement brought the decision forward.
Riverside also brought in an experienced chief financial officer who had worked at one of its other portfolio businesses, Retail Zoo. "IPAR was a small business growing quickly and it needed a stronger finance function. Bringing in a CFO was a very valuable decision," Speer says.
A merger of equals
Next, Riverside helped with M&A activity, which Sagar had also been undertaking but only on a small scale. “I had wanted to turbocharge our M&A efforts and their help has given us the courage to do that,” he says.
"I had wanted to turbocharge our M&A efforts and their help has given us the courage to do that."
Since then, Riverside’s networks, business smarts and injection of capital have resulted in a transformative merger that Sagar is doubtful would have happened without the help of private equity.
"Riverside's networks, business smarts and injection of capital have resulted in a transformative merger..."
Sagar had known WorkFocus Group – a Perth-headquartered competitor – for some time and had long thought it would make a good fit for a merger. “It was strong where we were less strong and I had a huge amount of respect for them as a competitor,” he says.
On meeting the WorkFocus team, Speer could immediately see why Sagar thought this way.
I walked away from the first meeting “incredibly impressed with the business, its people, its culture, and growth track record”, Speer says. “It had the same operating performance and customer focus as IPAR, but geographically they were strong where we weren’t and it had already made further inroads into disability employment services which was an area IPAR had decided it wanted to pursue.”
The merger created the clear market leader in the occupational rehab space. It resulted in a business more than twice the size of its nearest competitor with a genuine national footprint (870 allied health, employment and support staff across 84 locations), added strength to the management team and diversified the group’s revenue streams. Speer sees a bright future.
“The addressable market available to Work Health Group exceeds $3bn meaning there are significant continued organic and inorganic opportunities available. We are actively engaged in discussions with a number of additional bolt-on targets – the consolidation play remains significant.”
Sagar says the deal simply would not have happened without the input from Riverside. It hadn’t just boosted his confidence but also, in terms of strategic thinking and financial acumen, it had put the business on another level.
“...in terms of strategic thinking and financial acumen, it had put the business on another level.”
On a personal level, it has meant many challenges for Sagar that have left him re-invigorated. "I had completed a number of acquisitions but we were always the elephant buying the flea," he says. "This was an integration of two similar-sized businesses and brought challenges for me as a manager and leader."
Sagar considers his experience with Riverside as overwhelmingly positive, and the proof can be found in what's been achieved. “They have done everything they said they would do,” he says. “They promised me I could run the business and they would stay out of the way and they have. They promised they would give me support when I wanted it and they have”.
“But you have to remember that we have done 100 per cent of the things we promised we would do. We have hit every forecast and we have won every customer that we said we would. It’s a partnership, and both sides have to do their bit."