Another major acquisition rocked the analytical instrument and laboratory product industry this year as Agilent announced a $1.5 billion offer for Varian (see IBO 7/31/09), uniting two top-15 instrument companies and affecting multiple product markets. However, the deal’s value paled in comparison to other large-scale M&A activity in recent years, such as Invitrogen’s $6.7 billion purchase of Applied Biosystems (see IBO 6/15/08) and Thermo Electron’s $10.6 billion merger with Fisher Scientific (see IBO 5/15/06). The absence of more mega deals this past year was perhaps expected given the uncertainty of future profit projections, stringent credit markets and suppressed activity from private equity firms. Nonetheless, the Agilent-Varian deal is indicative of continuing consolidation among analytical instrument companies. In fact, it appears that the economic downturn has made some companies more willing to sell. The pending sales of Varian to Agilent and MDS Analytical Technologies to Danaher (see IBO 9/15/09) both gained support from shareholders following the onset of the economic crisis.

For other large analytical instrument and laboratory product companies, it was another year of targeted bolt-on acquisitions, as companies pursued good deals in strategic markets. In particular, companies focused on technological, regional and opportunistic purchases. Diminished prospects in the public markets, as well as tight credit markets and venture capital funding may have forced some companies to sell. Overall, M&A activity in the instrument and lab products industry seemed to pick up as the year progressed.

IBO’s annual summary of mergers and acquisitions in the analytical instrument and laboratory product–related markets is comprised of deals announced in IBO between November 16, 2008 and November 15, 2009. The article and tables are based on publicly available information.

On average the premiums paid in 2009 were less than in 2008 (see IBO 11/15/08), possibly due to declining sales and poor visibility in projecting future revenue growth. The highest premium paid for a pure-play instrument or lab product company was 1.5 times sales from the proposed transaction Agilent and Varian. Over the last year, the five largest pure-play acquisitions have an average price-to-sale ratio of 1.2, compared to 2.9 in 2008.

This year’s top five largest pure-play deals were motivated by new market growth opportunities and business synergies. Agilent’s acquisition of Varian, which was the largest announced transaction in 2009, will strengthen the company’s position in a number of instrument and consumables markets, while providing new opportunities in the industrial and life science markets. This deal signifies Agilent’s strategy to focus on its Bio-analytical measurement business. In addition, the acquisition is expected to generate $75 million in annual cost synergies within five years.

Like Agilent, Danaher diversified its analytical instrument business through major acquisitions in 2009. Danaher, which accounted for two of the five largest acquisitions announced over the last year, penetrated the MS market via the acquisitions of Life Technologies’ 50% MS joint venture with MDS Sciex and MDS’s Analytical Technologies division, which included the remaining 50% ownership in AB Sciex, as well as MDS’s drug discovery and bio-research product lines.

Life science was also the focus of the third largest deal this year, Corning’s $400 million acquisition of Axygen BioScience, a manufacturer and distributor of plastic consumables and lab equipment (see IBO 9/30/09). The addition of Axygen diversifies Corning’s portfolio of general labware, cell culture, and high-throughput screening products. Rounding off the list of top five acquisitions is Abbott Laboratories’ purchase of the remaining 81% purchase of Ibis Biosciences, which adds MS instrumentation with applications in pathogen detection to the company’s molecular diagnostics business.

Each of these purchases represents a diversification opportunity for the acquiring company. With the purchase of Varian, Agilent will add NMR, prep LC instruments and consumables, and new molecular and atomic spectroscopy techniques, among other offerings, to its product portfolio. Danaher’s purchase of the Life Technologies/MDS Sciex MS joint venture marks the company’s entry into the MS market, while the purchase of the remainder of MDS Analytical Technologies takes it into the lab automation segment of the life science research market. The purchases indicate major commitments by each company to these markets, setting the stage for new competitive dynamics and a build-out of each business.

Other companies venturing into new markets via acquisitions included: Hach in the LIMS market (see IBO 2/15/09), Analytik Jena in lab automation (see IBO 3/15/09), Horiba in label-free detection (see IBO 4/30/09), Millipore in cell analysis instrumentation (see IBO 2/15/09), PerkinElmer in MS (see IBO 5/15/09), Promega in plate readers (see IBO 8/15/09), and Roche Applied Science in cell imaging, cell counting, cell culture analysis and biochemistry analyzers (see IBO 3/31/09).

Danaher’s purchase, as well as acquisitions by PerkinElmer and Abbott (see IBO 12/31/08) heightened M&A activities involving MS this year. Both Danaher and Abbott indicated interest in expanding clinical diagnostic applications of MS technology, drawing on their positions in the diagnostics market. PerkinElmer’s purchase of Analytica of Branford positions another company for MS offerings for industrial applications.

Although acquisition activities surrounding sequencing slowed this year, other life science techniques continued to attract suitors. The fast growth and multiple market opportunities for real time PCR triggered acquisitions by Life Technologies (see IBO 7/31/09) and QIAGEN (see page 2, IBO 9/30/09). Cell analysis techniques were the focus of acquisitions by Life Technologies (see IBO 11/30/08), Millipore and Roche Applied Science, which returned to instrument acquisitions after a busy year in 2007 (see IBO 11/15/07).

M&A continued to be active for life science research consumables, such as reagents, assays and other aftermarket products. Driving the consolidation are companies both large and small. Assays and kits for life science research are high-margin, recurring items. Products for certain segments of the life science research market, such as molecular and cellular biology, are among the fastest-growing aftermarket products for analytical instrumentation. Making acquisitions this year to continue to grow their life science consumable offerings were Enzo Biochem (see IBO 3/15/09), Millipore (see IBO 2/28/09) and Sigma-Aldrich (see IBO 3/15/09). Smaller firms making purchases included eBioscience (see IBO 10/31/09), Eurogentec (see IBO 10/31/09) and OriGene (see IBO 3/15/09, 10/31/09).

Another ongoing trend are acquisitions to expand regional distribution. To no one’s surprise, Indian companies continued to attract purchasers, which this year included AMETEK (see IBO 9/30/09) and Merck KGaA Chemicals (see IBO 10/15/09). In Asia, Thermo Fisher Scientific expanded its distribution opportunities in the region with the $120 million purchase of Biolab (see IBO 4/30/09). Thermo also disclosed in a regulatory filing that its Analytical Technologies segment added other businesses in Asia, specifically a Malaysian manufacturer of culture media and a Singapore-based distributor. Axygen’s Asian presence was a factor cited by Corning in leading to its purchase of the company.

Growth in South America drove an expanded instrument and lab product market presence through acquisitions for Danaher (see IBO 10/31/09) and Sigma-Aldrich (see IBO 3/15/09). Europe and its distribution opportunities continued to be focus for VWR (see IBO 10/15/09) and Thermo Fisher Scientific, which disclosed in a regulatory filing that it bought a Spanish lab instrument and equipment distributor. Newer company seeking growth outside of their home continents via European acquisitions included Cell Signaling Technology (see IBO 7/15/09) and eBioscience. Vice versa, Asian firm Techcomp acquired a French lab equipment company (see IBO 8/15/09) to expand its European presence, and Eurogentec (see IBO 10/31/09) and Olympus (see IBO 6/15/09) sought increased US sales through acquisitions.

Notable bolt-on acquisitions during the year were made by Bruker (see IBO 3/15/09), Dionex (see IBO 9/30/09) and Waters (see IBO 2/15/09), as each acquired small companies with adjacent product lines. Companies driving consolidation in product markets included IDBS in lab data management (see IBO 6/30/09), Instron (Illinois Tool Works) in physical testing (see IBO 4/15/09), Lab Vantage in LIMS (see IBO 6/30/09) and NETZSCH in calorimetry (see IBO 4/15/09).

For some larger firms, acquisition activities were balanced with divestments, including Agilent (see IBO 7/31/09, 9/30/09), FEI (see page 2), Life Technologies (see IBO 6/30/09) and Thermo Fisher Scientific (see IBO 3/31/09).

Instrument and lab products suppliers also pursued acquisitions in other markets, most notably for diagnostics in the cases of Genetix (see IBO 6/30/09), PerkinElmer, QIAGEN (see IBO 9/30/09) and Thermo Fisher Scientific (see IBO 9/15/09). Likewise, diagnostic heavy weights Becton Dickinson and Bio-Rad Laboratories, which also have research product businesses, expanded their diagnostics businesses. In October, Bio-Rad purchased certain assets from BioTest AG for $67 million and Becton Dickinson’s acquisition of HandyLab, a provider of molecular diagnostic instruments and reagents.

Five Largest Pure-Play Instrument and Laboratory Product–Related Acquisitions in 2009

Purchaser Acquired Purchase Price Acquired Co.’s Annual Sales ($M)

Agilent Varian $1,500.0 $1,013.0

Danaher MDS’s Analytical Technologies division $650.0 N/A

Danaher Life Technologies’ MS joint venture $450.0 N/A

Corning Axygen BioScience $400.0 N/A

Abbott Isis’s Ibis Biosciences subsidiary $175.0 N/A

Five Largest Premiums Paid in 2009 for Pure-Play Companies with Sales Over $10 Million

Purchaser Acquired Purchase Price ($M) Acquired Co.’s Annual Sales ($M) Price to Sales Ratio

Agilent Varian $1,500.0 $1,013.0 1.5

Harvard Biosc. Denville Scientific $24.0 $19.0 1.3

Cell Biosciences Alpha Innotech $20.0 $17.6 1.1

Enzo Biochem Assay Designs $12.2 $11.0 1.1

PerkinElmer Analytica of Branford $24.0 $23.0 1.0

Five Best Values in 2009 for Pure-Play Companies with Sales Over $10 Million

Purchaser Acquired Purchase Price ($M) Acquired Co.’s Annual Sales ($M) Price to Sales Ratio

Thermo Fisher Biolab $132.0 $130.0 1.0

Millipore Guava Technologies $22.6 $21.9 1.0

PerkinElmer Analytica of Branford $24.0 $23.0 1.0

Enzo Biochem Assay Designs $12.2 $11.0 1.1

Cell Biosciences Alpha Innotech $20.0 $17.6 1.1

Largest Number of Instrument and Laboratory Product–Related Acquisitions in Past Year

Company Number of Acquisitions

Danaher 6

PerkinElmer 4

Sigma-Aldrich 4

Thermo Fisher Scientific 4

Chart: Value of Five Largest Instrument and Laboratory Product–Related Acquisitions ($ Millions)

2007 $5,366 $3,600

2008 $1,775 $6,700

2009 $1,675 $1,500