Laboratory Services – The Notable Trends
12 Dec, 2019
Our research in the Laboratory Services sector has found that a fragmented competitive landscape coupled with positive industry dynamics has seen a sector poised for continued strong growth. In addition, we see high valuation multiples, particularly where there is significant IP and technical expertise.
Active strategic buyers, both domestic and international
Since 2015 acquisitions have added more than £300m to group revenue for FTSE 100 company Intertek, which provides testing, inspection and quality assurance services. That includes large cross-border deals, such as the £370m acquisition of US online safety training provider Alchemy Systems, and smaller bolt-ons, such as June’s £9m deal to buy UK-headquartered NTA Monitor (£3m sales). Intertek continues to look for companies operating in high-margin and high-growth niches that it can scale internationally.
Eurofins, a Luxembourg-based provider of analytical testing services, has been buying to pursue its international growth plan. It made 20 acquisitions in 2018, and so far this year has snapped up nine laboratory measurement and testing businesses across Europe, China and the US, taking its international network of laboratories to more than 800 sites.
Swiss technical and quality assurance consultancy SGS is another active buyer. Including in July it acquired Wolverhampton-based DMW Environmental Safety from the founding family, building its environment, health and safety services in the south of England.
US-headquartered multinationals with appetite to acquire in the UK include Fortive, a buy-and-build group that owns Brighton-based West Control Solutions, a manufacturer of temperature and process control instrumentation. We have also seen Ecolab announce three UK acquisitions since 2017, including sterile equipment manufacturer Bioquell for £117m, although in October the Competition & Markets Authority ruled against Ecolab’s attempt to acquire hygiene products firm Holchem.
Continued high levels of interest from financial sponsors
Last year H2 Equity Partners consolidated its investments in medical devices and consumables, merging Basingstoke firm Aquilant with Ireland-based Healthcare21, to form a market-leading group in healthcare and scientific sales & distribution, with a combined turnover of €150m.
Golden Gate Capital and GTCR backed September’s management buyout of US-based Cole-Parmer to drive organic growth and strategic add-on acquisitions, on what it sees as a fragmented life sciences and laboratory products sectors.
Private equity firm Ardian formed French group Kersia in 2016 and since then it has supported five strategic acquisitions to build Kersia’s position in food hygiene and disinfection services. That includes acquiring Kilco, a Scotland-based specialist in animal health & food hygiene last year; in July Kersia expanded into North America with the acquisition of Quebec-based Choisy Laboratories.
Acquirors worth watching
Nalka Invest bought Onemed in January and it plans to make the Sweden-headquartered medical supplies business a pan-European organisation. Onemed currently has no UK operation, however historically it has acquired to enter new geographies; since January it has acquired distribution companies in Estonia and Norway (buying Mercurio OÜ in July and aScan in September).
Cambridge-based SDI Group designs and manufacturers scientific and technology products for a range of markets, including life sciences and consumer manufacturing. It has acquired to build its capabilities in sensors and controls, and has bought five UK-based businesses in the last 18 months. The group’s strategy is to continue its buy-and-build, particularly where targets have niche expertise and sustainable profitable businesses..
Our recent transactions
Rockworth recently advised Cherwell Laboratories, a supplier of specialist environmental monitoring products and consumables, on its investment into Pinpoint Scientific, a Wales-based developer of microbial environmental monitoring equipment. Rockworth acted as Cherwell’s dedicated advisor, negotiating commercial terms and managing the transaction alongside co-investor, Development Bank of Wales. The deal gives Cherwell exclusive UK and Europe distribution licences for a key Pinpoint product, and it brings opportunities for product development collaborations.
I’d like to thank Rockworth for their guidance, advice and pragmatism during what has been a very quick turnaround. It has been a pleasure.”
Andy Whittard, Cherwell’s Managing Director
Our experience shows us that successful transactions in Plastics & Packaging M&A are the result of exhaustive market research processes, numerous in-depth (but anonymous) conversations with C-suite figures, multiple discreet meetings with potential acquirors and a truly competitive bidding process.
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