Medical Device Contract Development and Manufacturing
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Medical Device Contract Development and Manufacturing October 2020 Global Investments and M&A - Q3 Report
Transcript of Medical Device Contract Development and Manufacturing
Medical Device Contract Development and Manufacturing
October 2020
Global Investments and M&A - Q3 Report
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▪ This material, including, without limitation, the statistical information herein, is provided for informational purposes only. Nothing in this material should be viewed astax, investment, legal or other form of advice, and may not be relied on in making an investment or any other decision.
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1 Grant Street
Suite 400 Framingham
Boston, MA 01702 USA
Carlo Stimamiglio
Partner
Gabriele Brambilla
CEO
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M&A Activity in the First Three Quarters of 2020M&A activity in the global Medical Device Contract Development and Manufacturing industry has been strong in 2020, with a recordnumber of transactions completed during the third quarter. The fundamental market consolidation trend continues despite the COVID-19 pandemic.
1LBOs: Leveraged Buy-Outs
Source: PitchBook, Alira Health Analysis.
▪ With 20 global transactions to date, the first three quarters of 2020 have already matched 2019’s entire volume of MedTech CDMO M&A deals.
▪ This pick up in M&A activity is remarkable in the context of the COVID-19 pandemic, which has caused an estimated 30% decline in annualized revenue for the Medical Device industry and negatively impacted contract manufacturers.
▪ Strategic acquirers have led deal making with 13 transactions completed to date. Half of these have involved cross-border M&A, primarily between Europe and the US.
▪ The two biggest strategic transactions of 2020 (Nolato’sacquisition of GW Plastics and Nordson’s buy-out of Fluortek) exemplify the continued trend of industry consolidation via inorganic growth.
▪ Private equity sponsors have also been active with seven LBOs1 in 2020, five of which were consummated in Q3. Of these PE-backed transactions, four are new investments and three add-on deals for existing platforms.
▪ The two largest CDMO deals of 2020 (NN Life Sciences and RTI Surgical OEM) are corporate carve-outs sponsored by private equity firms.
Quarterly MedTech CDMO M&A Deals
2019 – Q3 2020
3
12
43
6
4
3
3
41
1
5
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
Strategic PE
4
6
4 4
6
5
11
4
Source: PitchBook; Alira Health Analysis
Valuation Trends in Medical Device Outsourcing
▪ These charts emphasize the normal range of implied revenue and EBITDA multiples from publicly available M&A deals in the MedTech outsourcing space since 2014.
▪ Transactions consummated in 2020 with publicly disclosed financial information reflect valuation metrics in line with the recent historical period.
▪ The variance in the valuation parameters reflects a wide differentiation among deal targets by financial performance and trajectory, capabilities, and end-market applications.
Normal Enterprise Value Multiple Range (2014-present)
7.0x 8.0x 9.0x 10.0x 11.0x 12.0x 13.0x 14.0x 15.0x
EV/EBITDA
Median = 10.5x Mean = 14.0x
Lowest EV/Sales:
Highest EV/EBITDA: 25.4x
7.5x
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x
EV/Sales
Lowest EV/Sales: 0.6x
Median = 2.0x Mean = 2.4x
Highest EV/Sales: 5.3x
EV/Sales EV/EBITDAEBITDA Margin
Mean 2.4x 14.0x 20%
Median 2.0x 10.5x 15%
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Strategic Drivers of CDMO M&A and Featured Corporate DealsSeveral transactions backed by corporate CDMOs reflected the pursuit of proprietary know-how for high-performance polymer processing, design and engineering capabilities, as well as the acquisition of scale and geographic footprint.
Specialty Plastics Capabilities
Date Target Acquirer Sales X EBITDA X EV
9/20 $229M
Swedish polymer company Nolatoacquired the US-based GW Plastics to grow its presence in North America.
1.2x 17.1x
6/20 $125M
Nordson acquired Fluortek to add custom precision tubing capabilities for minimally-invasive devices.
6.3x n.a.
Design & Development Services
Date Target Acquirer Sales X EBITDA X EV
8/20 $2MForward Industries acquired design firm Kablooe to establish upstream medical device design capabilities.
n.a. n.a.
2/20 n.a.Heraeus bought CMI to acquire R&D capabilities of delivery systems for minimally-invasive catheters.
n.a. n.a.
Date Target Acquirer
9/20
9/20
7/20
7/20
6/20
5/20
3/20
3/20
1/20
Other Strategic Deals
Hypotube Manufacturing
Source: PitchBook, Alira Health Analysis
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Private Equity-Backed CDMO TransactionsThe third quarter of 2020 has seen a record number of private equity transactions. Two new CDMO platforms invested by financial sponsors joined a large pool of PE-backed players.
Source: PitchBook, Alira Health Analysis
Q1 – Q3 2020 Private Equity CDMO ActivityMany of the 31 PE-backed CDMOs currently active were initially invested five or more years ago. The approaching maturity of several investments may indicate that several exits are on the horizon. Some notable PE-sponsored CDMOs are featured below.
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About the Authors
CARLO STIMAMIGLIOPartner – San FranciscoAlira [email protected]
Carlo Stimamiglio is a Partner in Alira Health’s Transaction Advisory practice and specializes in helping medical device, digital health and pharmaceutical companies in the execution of strategic and M&A deals. Besides his focus on healthcare technologies, Carlo leads Alira Health’s Contract Manufacturing practice and has been an active strategy and transaction advisor to global CDMOs. Carlo is a registered investment banker with FINRA Series 79 and 63 licenses. He earned a MS in Finance from the University of Verona and an MBA from IE Business School.
CAMPBELL ROELLIGAssociate – San FranciscoAlira [email protected]
Campbell Roellig joined Alira Health in 2018 with previous experience in Investment Banking and private equity in the Technology and Aerospace & Defense sectors. Campbell focuses on M&A and other transaction advisory services and specializes in Medical Devices and Contract Manufacturing. Campbell earned a B.A. in Economics with a focus on Corporate Finance and Accounting from UC Santa Barbara. Campbell is an Investment Banking Representative holding FINRA Series 79 and Series 63 certifications.
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