Merck KGaA stimulated the analytical instrument and laboratory product–related mergers and acquisitions (M&A) market by outbidding Thermo Fisher Scientific in February to acquire Millipore for $7.2 billion (see IBO 2/28/10). This marked the industry’s largest acquisition since Thermo Electron’s $10.6 billion merger with Fisher Scientific in 2006 (see IBO 5/15/06) and started the M&A year off with a bang.

Clearly, the improved economic landscape, including healthier credit markets and stabilizing equity prices, has encouraged M&A activity this year. The median purchase price for transactions that IBO tracked for which companies provided details was $29.0 million, compared with $19.5 million in 2009. Following the economic downturn in 2009, in which companies focused on conserving cash and reducing expenditures, a number of companies this year sought to use their cash on strategic acquisitions to expand core product lines, diversify into growing markets or further extend their geographical reach.

IBO’s annual summary of M&A in the analytical instrument and laboratory product–related markets is comprised of deals announced in IBO between November 16, 2009, and November 15, 2010. The article and tables are based on publicly available information.

This year’s top five largest pure-play deals (see table, page 6) were driven by product diversification and directed at creating company value. Merck’s acquisition of Millipore, which was the largest transaction in the past year, not only diversified the company beyond its pharmaceutical business, but provided the company with a comprehensive product offering for pharmaceutical and biopharmaceutical research and manufacturing. Furthermore, the acquisition expanded Merck’s geographical reach and offered access to the higher-growth and highly profitable bioresearch and bioproduction markets. While Merck’s intentions were purely driven by value creation, the company anticipates cost synergies of $100 million annually within three years of the completed transaction.

Much like Merck, ITT’s acquisition of Nova Analytics expanded the company’s presence in categories adjacent to its core businesses (see IBO 2/28/10). The acquisition considerably broadened ITT’s analytical instrument offerings and provided it with a new business on which to build. However, the purchase price of $385 million, plus other considerations of up to $350 million in cash and stock for certain milestones through 2012, was a distant second in value to Merck’s transaction. ITT complemented its newly formed analytical business with the purchase of OI (see IBO 9/15/10), which added a different set of technologies that are purchased by many of the same end-user markets as Nova Analytics’ offerings.

This year, Life Technologies and Thermo Fisher Scientific, which were responsible for the third- and fifth-largest transactions, respectively, each extended key products lines through life science acquisitions targeting fast-growing markets. Life Technologies acquired Ion Torrent (see IBO 8/31/10), adding another DNA sequencing platform to its technology portfolio in order to pursue applications in targeted sequencing. Thermo’s acquisition of Fermentas International (see IBO 5/31/10) provided the company with PCR and other molecular biology reagents, giving it a more complete product line in key segments of the life science market.

Private equity firm New Mountain Capital was responsible for the fourth-largest analytical instrument and lab product–related transaction so far this year. It acquired Mallinckrodt Baker (MBI), a manufacturer of chemicals, from Covidien for $280 million (see IBO 5/31/10). The deal was evidence of private equity’s return to the M&A market. MBI, which changed its name to Avantor Performance Materials, also acquired an 85% stake in RFCL (see page 2). Including the New Mountain Capital purchase, there were five transactions led by private equity firms this year, compared with none in 2009.

Given the increased M&A interest and recovery in the equity markets, premiums paid in 2010 were well above those paid in the previous two years. The highest premium paid for a pure-play instrument or lab product company was the 4.7 times sales that Thermo paid for Fermentas. Over the last year, the five largest pure-play acquisitions had an average price-to-sale ratio of 4.3, compared with 1.2 and 2.9 in 2009 and 2008, respectively.

Aside from ITT and Merck, several other large diversified companies made strategic acquisitions to expand their analytical instrument and laboratory product–related businesses. Abbott (see IBO 12/15/09), Corning (see IBO 8/15/10), Olympus (see IBO 8/15/10) and Sony (see IBO 2/15/10) each entered or expanded their presence in the analytical technology market. Abbott targeted the healthcare informatics market, including laboratory data management, with the purchase of STARLIMS. Corning expanded its Life Science division by acquiring Plastiques Gosselin, a distributor of plastic consumable labware in Europe. Olympus enhanced its existing X-ray instruments portfolio via the acquisition of Innov-X Systems. Sony entered the flow cytometry business, emphasizing technology synergies with its existing product lines, through the purchase of iCyt Mission Technology. AMETEK (see IBO 4/15/10), Danaher (see IBO 12/31/09, 1/31/10, 4/30/10) and Illinois Tools Works (see IBO 9/15/10) also added to their analytical instrument and lab product–related businesses.

Another ongoing trend was acquisitions to expand regional distribution, which were mostly concentrated on emerging and European markets. Many companies invested in distributors in order to increase their foreign presence, including Illinois Tool Works, Life Technologies (see page 2), Millipore (see IBO 11/30/09), VWR (see IBO 8/15/10, 9/15/10) and Zwick Roell (see page 5). Other companies expanding outside their home countries included Danaher (see IBO 1/31/10), Kaneka (see IBO 6/30/10) and Techcomp (see IBO 3/15/10). India was a particular focus, as Avantor, Life Technologies and Millipore all invested in acquisitions to expand their analytical instrument and lab product businesses there.

As usual, M&A activity was hottest in the life science market. In addition to Life Technologies and Thermo’s acquisitions, AB SCIEX (see IBO 2/28/10), Agilent (see IBO 2/15/10), Danaher (see IBO 12/31/09) and PerkinElmer (see IBO 8/15/10) purchased technologies for life science research. HPLC was a particular focus, with Thermo and AB SCIEX both buying LC instrument providers. In vivo imaging for preclinical research was the focus of acquisitions by SonoSite (see IBO 5/31/10) and PerkinElmer.

Following the economic hangover in 2009, a number of companies responded to the ominous economic uncertainty by diversifying beyond cyclical or declining markets, as well as divesting non-core businesses to improve company balance sheets. Agilent sold its Hycor diagnostics business, stating that it deviated from the company’s market strategy (see IBO 2/15/10). Symyx Technologies divested its lab automation business (see IBO 2/15/10). PerkinElmer announced the divestment of its Illumination and Detection Solutions business (see IBO 8/31/10). Both Caliper Life Sciences (see IBO 6/15/10) and Veeco Instruments (see IBO 8/31/10) sold certain assets to improve their balance sheets and to focus on core growth areas.

As it turns out, both transactions were instrumental in moderating Biotage and Bruker’s concentration in the pharmaceutical markets, respectively. Bruker further expanded into industrial markets with its purchase of several Varian product lines that Agilent was required to divest (see IBO 3/15/10).

M&A Pricing

In regulatory filings, companies often disclose details of acquisitions that were not made public when the deal was announced. Among the companies disclosing additional details about acquistions made this year was Thermo Fisher Scientific. Regarding its purchase of Finnzymes (see IBO 5/31/10), a company with $20 million in sales in 2009, Thermo stated a purchase price of $58 million, net of cash acquired. For Nova Wave (see IBO 2/15/10), which had $4 million in sales, Thermo paid $21 million with possible additional contingency payments of up to $5 million. Thermo also revealed it paid a total of $83 million, and up to $7 million in contingent consideration, for four companies, including Nova Wave, Proxeon A/S (see IBO 4/15/10) and Polychromix (see IBO 9/15/10).

PerkinElmer disclosed additional details of two acquistions. It paid $29.8 million in cash for VisEn (see IBO 8/15/10), with an additional $5 million held in escrow. The company acquired the 50% share of its inductively coupled plasma–MS joint venture from Danaher for $35.0 million in cash (see IBO 2/28/10).

ITT revealed a $385 million purchase price, net of cash acquired, for Nova Analytics, which had sales of 2009 sales of $135 million (see IBO 2/28/10). VWR paid an aggregate price of $33.7 million for EBOS Group (see IBO 8/15/10) and LABART (see IBO 9/15/10). Alos, Harvard Bioscience disclosed that its Denville Scientific subsidiary paid $4.6 million for Coulbourn Instruments (see IBO 8/31/10).

Top 5 Best Values in Past Year for Pure-Play Companies with Sales Over $10 Million

Purchaser Acquired Purchase Acquired Co.’s Price to Sales Ratio

Price($M) Annual Sales ($M)

Entologi RTS Life Science $1.0 $14.5 0.1

Bruker Varian’s lab GC, triple quadrupole GC/MS, $37.5 $96.0 0.4

ICP-MS and micro GC businesses

NEXUS Biosystems Tecan’s REMP AG business $18.0 $32.7 0.6

New Mountain Capital Mallinckrodt Baker $280.0 $414.0 0.7

Mettler-Toledo Diploma’s Anachem Liquid $12.7 $17.3 0.7

Handling business

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

Purchaser Acquired Purchase Acquired Co.’s Price to Sales Ratio

Price($M) Annual Sales ($M)

Thermo Fisher Scientific Fermentas Int. $260.0 $55.0 4.7

Merck KGaA Millipore $7,220.0 $1,654.4 4.4

Abbott STARLIMS Techn. $123.0 $30.0 4.1

Thermo Fisher Scientific Ahura Scientific $145.0 $45.0 3.2

Life Technologies GENEART AG $75.0 $24.0 3.1

Greatest Number of Reported Analytical Instrument and Lab Product–Related Acquisitions in Past Year

Company Number of Acquisitions

Thermo Fisher Scientific 7

Life Technologies 4

PerkinElmer 4

Bruker 3

Column Graph: Value of Largest Analytical Instrument and Lab Product–Related Acquisitions (Millions)

Year Top 2-4 Top 1

2008 $1,775 $6,700

2009 $1,675 $1,500

2010 $1,300 $7,000