It is two days after Frank Madden closed a mega-deal with Chicago-based private equity firm Water Street Healthcare Partners. It is one of the biggest corporate finance deals of the year, yet it barely makes a ripple in the Irish media when it is announced on October 12.

Madden, the 54-year-old founder of Crest Solutions, could be forgiven for taking a break. After all, the past six months have been monopolised with intense due diligence to close a complex deal that creates what will become a global powerhouse provider of machine vision, serialisation, digitalisation and more to life science giants around the world.

Instead, Madden is on his feet in the Ballymaloe Grainstore in Shanagarry, Co Cork sharing his business story to a room of emerging and veteran entrepreneurs. Over the next 24 hours Madden will immerse himself in helping aspiring entrepreneurs who are attending the CorkBIC Entrepreneur Experience.

It is full circle for Madden. He first asked CorkBIC for advice on how to be an entrepreneur over a decade ago. Now he is giving a keynote speech without notes, entirely off the cuff. He has a remarkable story to tell.

Between the ditches on a foggy night

For most of the last decade, Frank Madden admits he has shared the same story about Crest Solutions when asked to speak publicly. It is a story of an electronics engineer who graduated in 1990 and went to work for Apple in Cork, rising to become operations manager.

In 1997 he and his colleagues learned that Apple might be closing the factory they worked in with the loss of hundreds of jobs. They decided to fight to keep the factory open by making it more efficient, with Madden writing software programmes to help the process. A lot of gains were made but it wasn’t enough. “Everybody worked so hard to try and keep the factory open, but it closed down,” Madden recalled.

In 1998 Madden took his redundancy package and sold all his Apple shares. He used the proceeds to start his own business.

For many years this could be seen as a terrible financial mistake. Apple’s valuation surged to over $2 trillion as it rolled out blockbuster products; Madden had sold out and saw none of the huge upside.

Instead, he was struggling in start-up land. Madden’s initial idea was to sell the efficiency software he created for Apple to other manufacturers. However, nobody other than Apple used its computers to make things. One of the first things he had to do was buy a PC and figure out how to programme for it.

“A lot of times when you are setting up in business the first idea might be the stupidest idea, but it doesn’t matter,” Madden reflected in his speech to fellow entrepreneurs. “The way I see it is you set out on the road on a very foggy night and as long as you keep between the ditches the fog will lift.

“And when that happens you are going to be so far ahead of everyone else with so much good experience behind you that your business has a chance.”

Madden knew nothing about business, so he did a course with Eileen Moloney, who had just started working with Cork BIC. “She would take people from multinationals and try to turn them into entrepreneurs. The learnings from that still survive today when it comes to business,” Madden said.

Madden called his new venture Crest Solutions, and gradually it began to win contracts with large life science and other big multinational manufacturers, most of them located in Ireland.

Crest never took in any external investment, but instead ploughed its profits back into the company and used funding from its customers to grow.

“For years I only had one sort of simple story to tell. It is the story of being a customer-funded business for 24 years,” Madden said.

“A customer funded business means that the only place I get money from is my customers. This means the only way I can live and feed my employees and family is by figuring out what brings value to those companies.”

He said this demanded that Crest maintain a relentless focus on delivering value to those customers. The downside was it had a lean balance sheet, so couldn’t take big risks.

As the room listens silently, Madden pauses from his story.

“Anyway that’s the story I have always told, but I am sort of fecked now, because I have a new story,” he declared.

The new story is Water Street Healthcare Partners has just invested in his business. Water Street was founded in 2005 by Tim Dugan, a former founding partner of JP Morgan Chase’s private equity arm, and it now manages $6 billion of equity capital investing in healthcare businesses. Madden and his team are now part of its portfolio, but he can’t discuss the exact terms of the deal. 

“I can’t give you the number, but it is a nine-figure number,” Madden said. “It was an unbelievable result for us, but the reality is that we are with private equity now and we have big plans for the next five years.”

“What would I do at the beach?”

It is just over two hours later on Friday, October 13. Frank Madden has just finished chairing a session with a group of entrepreneurs and we are sitting in a side room nearby. Madden is energised from hearing their stories – whether it is building a new whiskey brand, turning a social media profile into a business, or trying to create a new software company to help online e-commerce businesses.

“This weekend is a bit special,” Madden laughs. “You get a great buzz out of it, and it is a fantastic networking experience. I am exposed to new ideas. We are in industrial automation services and support for the life science industry, but I am meeting new entrepreneurs and getting exposed to them. I probably learn more from them.”

Were you not tempted to go on a holiday after closing such a big deal? “The beach thing. People talk about that, but it is not true. Entrepreneurs can’t just walk away and go to the beach. What would I do at the beach?” Madden laughs.

Madden said he was fired up by Water Street’s investment, but he admits having a new investor will allow him to achieve more work-life balance.

“I would like to get to 40:40 meaning working 40 hours a week with no distractions for 40 weeks a year,” he said. “I do want time to be with my family. Everyone who sets up their own business sacrifices time. Covid has had a huge impact on me positively as I realised I don’t have to come home on a plane late Friday and then go back on a plane on Sunday in order to run the business.”

Our conversation then turns to the decision to bring in private equity. It didn’t happen overnight.

*****

Up until 2015 Frank Madden ran Crest Solutions like an entrepreneur: the passion, the scrambling, the long hours. Crest was making money. But it was reinvesting all of it so it lacked the spare cash to buy other businesses or to easily risk going into new markets.

“An entrepreneur is usually the worst person to make money,” Madden tells me.

“They are good at ideas and passionate, but they are not always thinking about money.” Madden hired Mark Purcell in 2015 from Dell to come in as chief operations officer. An accountant and experienced project manager, Purcell’s task was to make Crest a better-run business operationally. “Mark understands operations and how to make money and since he joined we have become a phenomenal business,” Madden said.

Crest’s finances improved, allowing Madden to think more strategically about what was next.

It was just as well.

Trump, a pandemic, and an opportunity

In 2017 Donald Trump was inaugurated as the 45th president of the United States. One of Trump’s campaign pledges was to bring more American manufacturing back to the United States. As a result, a customer of Crest Solutions decided to build a new factory in America instead of Ireland. “We had a big problem as we had no ability to deliver in the US at the time,” Madden recalled. “One of our biggest customers had a €6 million project that we needed to figure out fast how to deliver.”

Crest had 18 months to do it, but because it was customer-funded it didn’t have the cash to just go and buy a local rival in the United States. Trump had tightened up visa restrictions too, so it wasn’t that easy to just send a team over from Cork. Crest had worked previously with a firm called Xyntek in Pennsylvania, so they decided to partner together again on this new project.

Crest built the technology required in Ireland and then shipped it to its local partner to install, service and support. “The project was an outstanding success,” Madden said.

Despite splitting the pie, Madden realised there had been efficiencies too in not having engineers flying back and forth.

Crest and Xyntek decided to formalise their partnership in what they called a “reverse franchise”. A third company in Belgium, VistaLink, came on board also. The new “reverse franchise” would become CXV Global.

The three companies each had sales of between €20 million and €30 million, but they were separately owned. “The idea was we still ran our own businesses but how we operate, and how it looks and feels to the customer will be the same,” Madden said. Having this shared platform allowed the three companies to offer more to their customers.

As CXV they were able to bid for a €14 million global contract with a cosmetics company. “This showed us immediately that globalising our business can really work,” Madden said.

Unfortunately, just as the project – which involved lipstick manufacturing – was due to begin, the pandemic struck. The deal was off as mask-wearing decimated the lipstick industry.

“The project was stalled for two years but it showed our strategy was right, and hopefully now it is coming back,” Madden said.

“We could see there was a way of winning global business without spending millions buying other businesses. We figured we could get much better purchase orders if we sold to the very highest people in pharmaceuticals rather than to the local factories.”

Another arm of Madden’s strategy was to productise his technology. This meant figuring out something it could deliver to its customers in a repeatable fashion that was worth something to them.

“We came up with this really good product that revolutionises how pharmaceutical companies change over their (manufacturing) lines (when making one drug and then another),” he said. “It is a phenomenal product that is based on machine learning.”

Madden secured patents in relation to this product, but he knew he needed more financial firepower to roll it out. “When you come up with a great idea you only have a few years to get it onto the market and ensure it becomes the standard,” Madden said.

The third part of the strategy was systemising the business. “Most businesses are chaotic, even established businesses,” Madden said, adding that better and more processes were put in place to create a stronger business.

“The fourth thing we did was build a professional services business as a tower within our business,” Madden said. This division had zero revenue in 2016 but now has sales of €20 million a year.

As Madden and his team made all these changes, they realised that the new technology their business had developed was a huge opportunity

“We figured out a way of taking a manual process that can take up to seven hours and doing it in 15 minutes. We use cameras rather than humans for line clearance and for changing over from product to another in pharmaceutical factories,” Madden said.

“The value proposition is that they could spend €500,000 with us and we could return that in enhanced productivity within 14 weeks. This is a golden product for our customers.”

As a customer-funded business Madden feared he wouldn’t have enough cash to allow his technology to reach its potential. It was time to change strategy. CXV Global hired PwC to examine its options.

Madden knew his business was strong. Crest Solutions alone reported sales of €27 million last year. All three companies within CXV Global had sales of over €60 million. They had a serious business, but how could they really accelerate it to become a player globally?

Enter Water Street

In 2021 PwC was appointed as advisor to CXV Global. The options included raising debt finance, selling up to a trade buyer, or bringing in private equity.

“A trade sale means game over for an owner founder. Debt funding was good, but it would not really pull all the different companies together. So, we decided to try and find the right private equity which would allow us to build the business by buying into our strategy,” Madden said.

“A really good PE allows companies to leverage their assets – not just their money but also their contracts.”

Water Street ticked all the boxes.

“What they do is they buy a platform company, and they look for a market that is very fragmented,” Madden said. “Pharmaceutical services are very fragmented. People who do what we do – industrial vision, industrial serialisation, industrial automation, and so on, usually they are small local companies that provide very good services to large pharmaceutical companies.

“But our customers want standardisation across the globe. They want one throat to choke. They want a one-stop shop. Some of our customers have over 200 factories in the world. But they have no one to give them a standard solution and (collect) all that data to come back. Our mission is to start buying and bolting on similar-sized companies. We want to defragment the market and be a global supplier.”

“After five years I am definitely done.”

Water Street Healthcare Partners are strategic investors who have pulled all three companies into a single entity. Madden and his fellow founders of the other companies remain significant shareholders in the combined group. Brendan McAtamney, the former CEO of UDG Healthcare, has come in as chairman of the combined entity to help lead this process.

Madden is the chief executive of the top company in the CXV Group; it will be headquartered in Cork where it employs over 300 people. “Nothing really has changed but everything has changed,” Madden said. “We would have organically kept building up this business over time but to get to $1 billion we needed funds to do more M&A. The only thing that has changed in our strategy is having private equity behind us will allow us to buy similar companies that are close to their customers and have a reputation for high service.

“I would love to lead an Irish-based billion-dollar company. There is not that many about. But I realise I couldn’t do it on my own.”

Madden said he had heard about companies who made money selling software via their websites, but that wasn’t the way he worked: “We are old-fashioned in the sense we want plenty of people near to our customers delivering great service. We want to be feet on the ground beside them.”

Does Madden wish he’d brought in an external investor sooner? “I don’t know I could have done it any other way,” he replied. “Years went by, and I didn’t notice because I liked it.

“Any business owner will tell you how lonely and difficult it is, but it is still a great job. It is only bad if you’re out of money and going to pull others down with you. I never got to that stage, but I got near it.

“That said, I don’t think I could do it all again (by starting a new business). I am on a five-year run now. I am going to look after my investors’ money the exact same way as I do my own. We will grow the business together – but after five years I am definitely done!”

Madden said in the past his time horizons weren’t aligned with any private equity investor, but as he got older, they were. “For us we will do everything we can to build the business for the next five years. After that maybe there will be a trade buyer, maybe you could IPO or maybe there will be more private equity,” he said, adding that he expected the business to double in size over the next five years to more than 1,000 people. 

Who is your competition? “There isn’t really a big player. That is what our investors see, and we see as a big opportunity,” Madden said.

He said CXV will buy other companies – not for revenue, but for footprint. “We want the ability to go to our customers and be beside them if they have plants anywhere in the world whether that is the US, Belgium, France, Germany, the UK, Ireland – even Asia,” Madden said. 

“Our value proposition is if you want to roll out industry 4.0 or industrial automation in a standardised way on a global scale with someone who has the competence to do it then we are that company.”

In October, just before bringing in Water Street, CXV bought Panacea Technologies, a gene therapy services specialist. “Panacea has no real exposure to Europe so we can bring them here,” Madden said. “We want to widen our product offering in the pharmaceutical manufacturing sector.” Post the Panacea deal he said CXV had eight offices in the United States alone. “We are only at the start of our new story,” Madden said.

Flat-pack housing, solar and energy storage

Frank Madden is a serial entrepreneur. But he doesn’t build one and then the other: he does everything at once. He is a director and investor in Framespace Solutions, which specialises in designing and marking light gauge steel structures for use in residential construction in Ireland and Britain. The business can make houses far faster than by traditional methods.

Madden said he hoped the business would be able to deliver houses for refugees from Ukraine. Another Madden business interest is Crest Pro Power, which supplies solar power solutions combined with energy storage systems to big manufacturers. “I believe each of these businesses could be a €100 million business,” Madden said. “When I think about investment, I think about what are the big trends.” Madden said there were only six apprentice blockmakers in Ireland at present, so being able to build modular housing was a big trend.

“Even before the Ukraine war, it was hugely important for a country to be self-sustaining in terms of energy,” Madden said. “It is geopolitical as well as the fact the stuff is running out.”

CXV he said was also tapping into a big trend. “Our customers want standardisation so that is the trend,” he said. Now that he had made some money from CXV, Madden said he had no plans to invest in more startups. “I have never invested in a business I don’t understand, and I don’t think that is going to change! I would be a very bad passive investor. If I invest in any business I want to be deeply involved.”