Healthcare Sector Comment – March 2010

Date

Welcome to Clearwater’s latest report on mergers and acquisitions activity in the healthcare sector, covering activity in the first quarter of 2010. This follows our latest deal in the sector – the acquisition of Dental Buying Group by Synova.

Areas that look particularly interesting from an M&A perspective over the next 12 months include consolidation of high quality residential care homes in the high acuity setting, outsourcing suppliers to the pharmaceutical sector, out of hours service providers looking to grow inorganically, and specialty niche pharmaceutical businesses looking to grow via domestic and cross border deals.

The appetite for investment is returning for trade buyers and financial institutions alike. Companies in the healthcare sector will look to react to the continuous downward pressures on NHS funding and the increased demand for services. New innovative solutions and models will be required to cope with these challenges across all parts of the healthcare sector.

So, what does this mean in terms of deals?

Healthcare companies will look for smart, synergistic acquisitions, while payers will seek solutions that can improve efficiency, capacity, and productivity in the delivery of care, and a way to improve patient safety and outcomes. There are reasons to be cautiously optimistic for increased M&A opportunities in the healthcare sector in 2010!

The signs are there for a healthier deal flow over the coming months!

Deals

Synova Capital LLP, the UK private equity firm, has acquired The Dental Buying Group (DBG), the UK based supplier of dental equipments and services, in a MBO, for an estimated consideration of GBP 10m. This acquisition will enable DBG to expand its business and provide better services to its customer.

August Equity LLP, the UK based private equity firm, agreed to acquire Active Assistance Ltd, the UK based live-in care service for physically disabled adults and children with spinal cord injuries, from Livingbridge for an undisclosed consideration. Active Assistance will be merged with August Equity backed First Call Care Services.

B&S Healthcare Ltd, has acquired Colorama Pharmaceuticals Limited, the UK based manufacturer and supplier of pharmaceuticals, for an undisclosed consideration. The transaction will enable the enlarged B&S Healthcare to have a significant presence in the pharmaceutical distribution sector.

Bridgepoint Capital, the UK private equity group, has acquired Care UK Plc, the listed UK based health and social care provider. The offer values the entire share capital of Care UK at GBP 283.4m on a fully diluted basis with an enterprise value of £442m.

Diasorin S.p.A, the listed Italian reagents in-vitro diagnostic business, has acquired the Murex product line and manufacturing assets from Abbott Laboratories, for a cash consideration of £39m.

Virgin Healthcare Holdings, has acquired a 75.1% stake in Assura Medical Limited, the UK based provider of healthcare services, from Assura Group Limited, the listed UK based property investment fund, for a consideration of £4m.

Novo Growth Equity and Warburg Pincus LLChas acquired a majority stake in Archimedes Pharma, the UK based pharmaceutical company engaged in development and commercialization of pharmaceutical products, for a consideration of £65m.

Baxter International has acquired ApaTech Limited from Encore Ventures and Healthcor Partners, for a maximum consideration of £220m. ApaTech Limited is a supplier of orthobiologics products. Baxter continues its drive to build on its strategic interest in regenerative medicine.

Albany Molecular Research Inc, the listed US based pharmaceutical company, has acquired Excelsyn Limited, UK based provider of advanced manufacturing, process technology and consultancy services, from Endless LLP and NorthStar UK private equity firms, for a total cash consideration of USD 19m.

Sisk Group, the Ireland based company engaged in construction, civil engineering and healthcare services, has acquired Eschmann Equipment, the UK based manufacturer of equipment for hospitals and dental practices, for a maximum estimated consideration of EUR 28m.

Bridgepoint acquires LGC from LGV for £257m. LGC’s products and services are focused on customers in forensic science, pharmaceutical and biotechnology research, food chain and environmental surveillance and safety, life sciences and genomics. LGC is strongly placed for further growth on the back of increasing regulation and the trend for outsourcing within both the public and private sectors.

Optegra acquired Yorkshire Eye Hospital for £4m. The Moonray Healthcare investment in Optegra is being used as a buy and build platform, by acquiring high value margin service businesses.

Capita Symonds has announced the acquisition of leading healthcare consultancy Inventures for an undisclosed sum. Inventures provides programme and project management, property and estate management, healthcare planning, and facilities management advice to the NHS and other public sector bodies across the UK.

Galapagos NV, the listed Belgium based biotechnology company, has acquired Argenta Discovery 2009 Ltd, the UK based provider of fee-for-service contract drug discovery research, for a cash consideration of EUR 16.5m. Pharmaceutical consolidation will squeeze outsourcing suppliers, and suppliers will continue to buy fee for service contracts via inorganic growth.

Watson Pharmaceuticals Inc, the listed US based speciality pharmaceutical company, that manufactures, markets and distributes brand and generic pharmaceutical products, has acquired Eden Biopharm Group Limited, the UK based biopharmaceutical development and contract manufacturing company, for a consideration of USD 15m, which will provide Watson with in-house biological manufacturing capabilities a growing market.

Teachers Private Capital, a private investment arm of Ontario Teachers Pension Plan (OCPP), has backed an MBO transaction of Acorn Care and Education Limited, the UK based provider of education and care services for vulnerable children and young people, from Phoenix Equity Partners Limited, the UK based private equity firm, for an estimated consideration of £150m.

Priory Healthcare Holdings Ltd has acquired Affinity Healthcare, the UK based provider of mental health services to the NHS, from Duke Street Capital, for an undisclosed consideration. The acquisition will increase Priory’s share in the mental health market, as Affinity had similar complimentary services.

Healthcare Homes Group, a residential care provider, acquired Olive House care home for an undisclosed consideration. Olive House is a high quality 3* residential care home and good assets like these will be picked up very quickly in the short term.

MWI enters the international animal health market by acquiring Centaur Services limited. The transaction is valued at approximately $47 million. This US and UK cross border deal will enable cross selling of animal products to vet clinics.