LONDON (The Deal) -- Buyout firm Cinven Ltd. said Monday it would buy a majority stake in medical contract research company Medpace in a deal which values the business at $915 million including debt and provides an exit for CCMP Capital Advisors LLC.
Cinven prevailed in an auction, beating late-stage bidders including GTCR LLC and Summit Partners with a deal to buy a roughly 80% stake. Medpace, of Cincinnati, generated adjusted Ebitda of $94 million in 2013 and was founded in 1992 by August Troendle, who is president and CEO, and who, with other managers, will hold the remaining shares.
Cinven said it expects strong growth in the contract research industry as clinical trials become more complex. It noted that the outlook for research and development expenditure is most positive for the smaller pharma and biotech companies which Medpace serves. Cinven said it wants to expand Medpace in its own geographical sweetspots of Europe and Asia and increase Medpace's business in newer sectors, including the metabolic, cardiovascular and central nervous system therapeutic areas.
"Cinven's healthcare team identified the CRO [contract research organization] industry as an attractive market in which to invest given its fundamental growth characteristics. The CRO industry consolidation has created a gap in the market serving the mid-cap pharma and smaller biotech players - where Medpace operates and where we intend to capitalize on organic growth opportunities," said Cinven partner Supraj Rajagopalan in a statement.
The buyout firm is financing the purchase with equity from its fifth, 5.3 billion euros ($7.3 billion) fund, which it closed last year, as well as with committed first-lien, U.S. dollar-denominated debt within a covenant-lite structure. The financing package is known to amount to about 55% of Medpace's $915 million enterprise value.
Cinven said it plans to replicate the types of expansion strategies it employed for Swedish diagnostics company Phadia AB, which it sold to Thermo Fisher Scientific Inc. in 2011 for 2.47 billion euros, or a money multiple of 3.2 times, having transformed its small U.S. business to Phadia's largest and fastest-growing geographical market; and for current portfolio company Sebia SA. Cinven bought the French diagnostics company from Montagu Private Equity LLP for 800 million euros in 2010 and has since expanded it in the U.S. and Asia.
Cinven doesn't envision striking transformative M&A transactions for Medpace but would consider bolt-on purchases for the Ohio business in Europe and Asia, a source said.
New York private equity firm CCMP agreed to buy Medpace in May 2011 in a deal known to have been worth about $535 million. A source said the buyout firm made 3 times its money and a 48% internal rate of return on the investment.
CCMP's Ryan Anderson and Kevin O'Brien, as well as CCMP president and CEO Stephen Murray, oversaw the process for the New York buyout firm, alongside Medpace's Troendle and CFO Jesse Geiger. As well as Rajagopalan, Cinven principal Alex Leslie also oversaw the purchase for the buyout firm.
A Barclays plc team led by Elizabeth Mily and a Wells Fargo Securities LLC team of Omid Ahdieh, Andrew Halverstam and David Cannon advised Cinven, while Medpace and CCMP were advised by Jefferies LLC's Michael Gerardi, Matthew Miller, Michael Leder, Jeffrey Greenip, James Seagrave and a Fairmount Partners LP team led by Neal McCarthy. Fairmount Partners advised on the 2011 sale of Medpace to CCMP and on Medpace's 2012 purchase of devices contract research organization Meditech Holding BV, of the Netherlands. A Weil, Gotshal & Manges LLP team including Harvey Eisenberg and Matthew Brush provided Medpace's legal advice.