Merck KGaA’s acquisition of Sigma-Aldrich for $17.0 billion ($16.3 billion net of cash) (see IBO 9/30/14) ranked among the top 10 of all US acquisitions announced year to date and set a new record for the instrument and lab-product–related industry. This transaction illustrates the continuance of consolidation for scalability and product depth among lab-consumable and -instrument companies. This deal also signifies one of the industry’s most expensive multibillion takeovers at over 20 times adjusted EBITDA, 6.3 times sales and a 37% share premium prior to the purchase announcement.

Overall, mergers and acquisitions (M&A) activity in the analytical-instrument and lab-product–related industry thrived in 2014 due to favorable financial conditions and improved economic outlook. Risk taking has also been encouraged by shareholders, as acquirers have been rewarded in the market. Given the higher cash reserves and low costs of capital, large firms are focused on acquisitions to improve financial performance, increase market share, expand infrastructure and obtain new technologies.

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 15, 2013, and November 15, 2014. The article and tables are based on publicly available information.

With the addition of Sigma, Merck further diversifies away from drug development and heightens its competitive edge in the lab-consumables and life science–research markets with breadth, scale and infrastructure to match its growing rivals, including Thermo Fisher Scientific. The acquisition also signals further consolidation in the lab-products industry. The ability to leverage scale as both a supplier and buyer appears to have become even more relevant due to slower growth in pharmaceutical and academic end-markets, expansion in emerging markets and customers’ reliance on fewer suppliers.

Another high-priced transaction was Dassault Systèmes’ acquisition of Accelrys for $750 million (see IBO 1/31/14). Similar to Sigma, the company’s valuation including cash was roughly 22 times adjusted EBITDA. However the price-to-sales ratio was lower at 4.5, as was the equity premium at nearly 29% above the unaffected price.

Bio-Techne was among this year’s most active acquirers as it initiated an aggressive acquisition strategy to transform from a reagent supplier to a provider of complete protein-analysis solutions. The purchases of ProteinSimple for $300 million (see IBO 6/30/14) and CyVek for a potential payout of over $195 million (see page 2) create an instrument business that can leverage its antibody portfolio. The company also bolstered its portfolio of antibodies through the purchases of Novus Biologicals (see IBO 7/15/14) and Shanghai PrimeGene (see IBO 4/15/14).

Similar to Bio-Techne, a number of companies broadened their product offerings through acquisitions. The Malvern Instruments business of Spectris entered the calorimetry market with the purchase of MicroCal (see IBO 6/15/14). Becton, Dickinson (BD) entered the next-generation sequencing (NGS) market with the purchase of GenCell Biosystems (see IBO 10/15/14). According to The Irish Times, the acquisition price was roughly $150 million. With the acquisition of DVS Sciences (see IBO 1/31/14), Fluidigm added a single-cell protein-analysis platform and expanded its customer base. Techcomp acquired certain Bruker GC and GC/MS assets (see IBO 10/15/14), giving the company not only GC technology but US-manufacturing capabilities. Oxford Instruments added cameras and microscope systems via the acquisition of Andor Technologies (see IBO 11/15/13), which also opened up opportunities in the nano-bio market.

Tuck-in acquisitions again dominated M&A in 2014 as companies continued to focus on scalability and market share. Within molecular spectroscopy, HORIBA and Bruker strengthened their biological-microscopy businesses with their respective acquisitions of Photon Technology International (see IBO 2/15/14) and Vutara (see IBO 7/31/14). TSI expanded its spectroscopy offering by adding Raman technology via the purchase of Enwave Optronics (see IBO 2/2/14). Teledyne Instruments acquired Photon Machines (see IBO 4/15/14), adding to its atomic spectroscopy offerings. FEI acquired Lithicon (see IBO 2/15/14) to further expand its solutions for the oil and gas industry.

In addition to Fluidigm, other life science companies expanded their instrumentation businesses for cell-analysis applications. Harvard Bioscience acquired Multi Channel Systems and Triangle BioSystems (see page 2), which, according to the company, doubled its market share for electrophysiology to roughly 15%. Danaher’s Beckman Coulter Life Sciences business expanded its flow cytometry offering along with R&D and manufacturing capabilities in China with the purchase of Xitogen Technologies (see IBO 4/30/14).

Other companies adding to growing business segments included Waters, which completed three tuck-in acquisitions to expand its TA business (see IBO 2/28/14). Also in materials characterization, Spectris added the Archimedes particle-characterization system from Affinity Biosensors (see IBO 7/12/14).

Infused with new capital from their recent IPOs, both Horizon Discovery and ReproCell were motivated by operating and financial synergies. Horizon added to its top line and broadened its product and service capabilities through the acquisition of Sage Labs (see IBO 9/30/14). ReproCell significantly expanded its iPSC offering through the acquisitions of Reinnervate (see IBO 8/15/14), BioServe Biotechnologies (see IBO 8/15/14) and Stemgent (see IBO 9/15/14).

In addition to BD, other companies increased their exposure to the sequencing market. Bio-Rad Laboratories entered the NGS sequencer business with the purchase of GnuBIO (see IBO 4/15/14) for $40 million in cash and up to $70 million in contingent payments. In spite of Roche’s shutdown of its 454 Life Sciences sequencer business (see IBO 10/31/13) and unsuccessful takeover of Illumina (see IBO 1/31/12), the firm made new investments in sequencing technology. It acquired nanopore-sequencing technology through the purchase of Genia Technologies (see IBO 6/15/14) and invested in Stratos Genomics (see IBO 6/30/14) and AbVitro (see IBO 10/15/14). QIAGEN continued to grow its sequencing-informatics business with the purchase of BIOBASE (see IBO 5/31/14).

The diagnostics market was again a hot spot for life science companies, as the adoption of new research techniques by clinical labs and other markets accelerates. Oxford Gene Technology expanded its chromosomal-microarray product offering with the purchase of Cytocell (see IBO 3/15/14). OriGene Technologies expanded its IVD portfolio with the purchase of BioCheck (see IBO 4/30/14). Douglas Scientific added a portable molecular-diagnostic–screening system through the purchase of DIAGENETIX, which also expands its customer base outside the lab to water and agriculture testing. Tecan entered the immunoassay market with the acquisition of IBL (see IBO 7/31/14). Miltenyi Biotec acquired Lentigen’s lentiviral-vector–manufacturing business (see IBO 8/15/14).

Despite high equity valuations and greater competition from corporations, private equity was also immersed in M&A. GTCR acquired Thermo’s Cole-Parmer business for $480 million (see IBO 7/31/14). Arsenal Capital Partners purchased bioinformatics-provider Certara (see IBO 12/31/13). Carlyle Group acquired a 30% stake in Haier Bio-Medical and Laboratory (see IBO 4/30/14).

Aside from the Thermo and GE Healthcare’s divestments, other companies sold certain assets or noncore businesses. To improve financial performance and reduce expenditures, Transgenomic sold its SURVEYOR enzyme business (see IBO 7/15/14), and Bruker divested its GC, single-quadruopole GC/MS and ICP-MS product lines (see IBO 8/15/14). To focus on core product and service offerings, Sequenom sold its Bioscience business to Agena Bioscience (see IBO 5/31/14), Cellectris divested its Swedish stem cell business to Takara Bio (see IBO 10/15/14), Brooks Automation divested Granville-Phillips (see IBO 5/31/14) and Merck KGaA sold its Discovery and Development Solutions business to Eurofins (see IBO 1/15/14).