I begin this abbreviated review of last year’s merger and acquisition activity by reinforcing a couple points I’ve made in several past annual reviews:
- Buyers and sellers are engaged almost continuously in multiple conversations about potential acquisitions and divestitures.
- The timing of announcements makes it appear that the flow of transactions varies quite a bit from quarter to quarter and year to year.
- The timing of completed deals is almost accidental; it reflects the nature of final detailed negotiations more than the overall level and progress of total M&A activity.
Even those of us who thought 2011 might be another busy year of consolidation across the outsourcing industry were surprised at the extent of that activity. I counted 140 relevant transactions last year; there were 130 such transactions in 2010.
Four large clinically-oriented CROs continued to enhance their core capabilities and expand their presence in new service areas:
- inVentiv Health built its annualized revenue base to more than $1.2 billion with the acquisitions of PharmaNet, Campbell Alliance, and i3 Research.
- ICON plc added specialty capabilities by purchasing Oxford Outcomes and Firecrest Clinical, and announcing the acquisition of BeijingWits Medical Consulting.
- INC Research enhanced its global presence with the acquisition of Kendle International, Trident Clinical Research, and Avos Life Sciences.
- Quintiles Transnational continued to fill in its service offerings by acquiring Advion BioServices, Outcome Sciences and VCG & Associates.
Three other major CROs found new financial partners:
- PPD Inc. agreed to be taken private for $3.9 billion by the combination of The Carlyle Group and Hellman & Friedman.
- Medpace sold an 80% equity interest to CCMP Capital Advisors.
- Omnicare Inc. sold its Omnicare Clinical Research unit to Nautic Partners, which promptly renamed that business Theorem Clinical Research.
Major companies in the broadly-defined laboratory, manufacturing, and instrumentation arena were also quite active:
- Danhaer Corporation’s $6.8 billion acquisition of Beckman Coulter was the largest in the industry.
- Perkin Elmer (Caliper Life Sciences), Eurofins (Lancaster Laboratories), and Laboratory Corporation of America (Clearstone Central Labs) also made large strategic purchases.
Many other important industry participants enhanced or expanded their businesses:
- Sigma-Aldrich, Intertek, QPS Corp., Aptiv Solutions, Catalent Pharma Solutions, Evans Analytical Group, Cambrex Corp., NSF International, and Akorn signed particularly noteworthy deals.
- WuXi PharmaTech acquired MedKey Med-Tech Development and Jiecheng Med-Tech Development, two related CROs in Shanghai, while ShangPharma acquired the assets of Charles River Laboratories’ research facility in that same city.
- Finally, in the first week of January 2012, AAIPharma Services announced the acquisition of Celsis Analytical Services, a division of Celsis International.
In trying to identify discrete trends in this brief review of 2011’s M&A activity, I was struck by the familiarity of the major themes:
- Large firms in all sectors continued to expand their list of services, as well as the geographic territories they served.
- The owners of most small and mid-sized players again demonstrated more interest in selling than in continuing to build larger empires.
- Private equity investors were as active as ever in closing deals, and probably more active than before in pursuing them.
- And finally, the outsourcing industry remained an area of intense interest and activity in a steadily evolving healthcare world.
Personal Note
After more than 30 years of researching, analyzing, and writing about various segments of the broad healthcare industry, I finally had a very direct and very intense personal experience with an assortment of caregivers. My new right hip is now four weeks old, and is functioning beautifully! Kudos and thanks to all the providers who made my surgical experience as pleasant as possible.
Michael A. Martorelli is a Director at the investment banking firm Fairmount Partners. For additional commentary on the topics covered in this column contact him at Michael.martorelli@fairmountpartners.com or at Tel: (610) 260-6232; Fax (610) 260-6285.