Private equity firms are taking big stakes in contract research organizations (CROs) in 2017. Through May 3, 12 CRO deals have been announced this year, up 140% from the same period last year, when only five deals were announced (these numbers do not include contract manufacturing organization deals).
In late April, The Carlyle Group was rumored to be weighing the acquisition of Albany Molecular Research Inc. (NASDAQ: AMRI), a New York-based CRO. A week later, the private equity firm announced the sale of its majority stake in Pharmaceutical Product Development, LLC (PPD), a global contract research organization that provides comprehensive, integrated drug development, laboratory and life cycle management services.
The sale didn’t come as a total surprise, since Laboratory Corporation of America Holdings (NYSE: LH) had been in talks to acquire PPD since December 2015.
On April 26, 2017, Hellman & Friedman LLC took over the majority stake in PPD from Carlyle in a deal valued at $9.05 billion.
Carlyle and Hellman & Friedman took PPD private in December 2011, for $3.6 billion. At the time of that transaction, PPD reported revenue of $1.54 billion on a trailing 12-month basis. Since then, the co-owners announced, PPD’s revenues grew more than 70%, to an estimated $2.62 billion in 2017, producing an EBITDA multiple of 3.46x.
Two new investors came on board in this latest recapitalization: a subsidiary of the Abu Dhabi Investment Authority (ADIA) and an affiliate of GIC, Singapore’s sovereign wealth fund (GIC). GIC and ADIA are longtime investors in Carlyle and Hellman & Friedman and now will be direct investors in PPD.
