German Pharma CRO Acquisition - Corporate Finance in Europe

Business case M&A deal German Pharma CRO Acquisition

This pharma CRO in Germany was acquired for an Enterprise Value of over 1.8 mio, fully upfront
The buyer is a Nordic corporate, with an ongoing strategy for consolidating a mid-size, full-service CRO group across the EU, for serving pharma, MedTech, IVD, and biotech clients.
CFIE advisory services: The CFIE Pharma M&A team advised in the full process of the company acquisition, which lasted about 24 months.
CFIE’s participation was key for aligning expectations, keeping sellers interested, and in pre-empting competition from another bidder. Significant work went into proper financial modelling and assessment of future business prospects, a key difficulty in the CRO industry.
The future role of owners and current management also called for careful negotiations, which concluded with satisfactory arrangements for both sides.
CFIE-led exchanges focused on the key factor for agreeing to a sale: the future of the acquired company and its staff. Price was secondary to strategic growth plans as a new division, which were discussed extensively until trust in them was built.

Deal Overview

The previous owners, all industry veterans with nearly three decades of experience in pharma and clinical studies, were faced with the same challenge many small European CROs are dealing with, namely limited prospects for organic growth. Thus, for the last few years they had been evaluating strategic options, and the sale to a larger corporate group emerged as the best option in their view, rather than a deal with a financial acquirer.
The acquired company had a focus on standard CRO services for pharmaceutical sponsors, but without in-house capabilities in certain areas of growing demand, like quality, biostatistics or data management. Thus, many synergies will accrue from joining the acquirer’s CRO group, including access to new sponsors, expansion into MedTech and other therapeutic indications and joint work with other units in Germany, Eastern European and Nordic countries.

Strategy of Buyer of this German Pharma CRO Acquisition

The buyer is a fast-growing subsidiary of a Nordic group offering consultancy services to pharma, MedTech, IVD, and biotech clients across the world. In the last couple of years, it has made substantial progress in building a full-service CRO business in Europe, with a combination of acquisitions and greenfield development of CRO services.

This CRO unit is thus now able to offer an ever-growing service portfolio, from standard clinical trial design, execution or monitoring to other drug development consultancy services, as well as similar offerings to medical device and IVD manufacturers.

The company is on its way to double its size in just three years, with the CRO unit accounting for most of this growth. If needed, financial backing from its parent group can be used for further, small and large acquisitions in the European CRO space for extension of its geographic footprint and of its service offerings to pharma, biotech, MedTech, and IVD clients.

Activities of the CFIE M&A team in the support of the German Pharma CRO Acquisition

The CFIE Pharma M&A team got a mandate to find suitable CRO targets across the EU from this Nordic group. The requirements were finetuned after certain milestones and acquisitions were completed, thus informing the deal sourcing strategy.

This particular target had been identified by CFIE about three years prior to the start of negotiations with this corporate buyer. A preliminary financial model was updated and enhanced with backlog and pipeline information.

As said earlier, owner concerns revolved mostly about the future growth strategy to be implemented by the acquirer.

Thus, the focus of preliminary negotiations was on building trust in the acquirer, as sellers already had good rapport with the CFIE team leader.

Negotiations had to be postponed for several months, as the buyer was in the final phase of one acquisition and advancing another one. In this period, CFIE, had to address seller concerns that the acquirer had lost interest, to prevent them from returning to talks with another corporate bidder.

Upon resumption of negotiations, several video calls, and many e-mails later, a clear picture emerged of the business value so the acquirer could draft an NBO. Upon additional negotiations, a Term Sheet was accepted and the DD exercise started, about one year and a half into negotiations. At that point, CFIE took a back seat and left the two companies to negotiate directly, with some occasional follow-up only by CFIE.

Investment highlights

Synergistic service offerings by the acquired CRO and the other CRO and consultancy business units of the acquirer
Agreements were reached on staff retention, and CEO continuity
Cost savings expected from centralized business development, shared IT and financial reporting, among others
Improved profitability to accrue from larger client base
The acquired company will also benefit immediately from missing CRO capabilities available elsewhere in the group, like data management.

About Corporate Finance in Europe

Feel free to contact us for further details about this German Pharma CRO Acquisition.

If interested in the sale of a pharma/medical device CRO, please feel free to contact us at pharma@corporatefinanceineurope.eu to arrange a confidential discussion.

Below please find other CRO companies for sale. Please get in touch via the contact form at the right side of this page so we can explain how we can help you buy or sell a pharma/medical device CRO.https://www.corporatefinanceineurope.eu/pharma/cro-companies-for-sale/