Thermo Fisher Scientific announced plans to acquire Life Technologies on April 15 for $13.6 billion (see page 2), making it one of the largest acquisitions in the history of the analytical and life science instrument industry. The acquisition brings together the largest and third-largest analytical instrument and lab product suppliers (see page 1), creating a company with a scale and breadth new to the industry. The deal combines the largest supplier of analytical instrumentation for industrial markets and of lab products with the largest provider of life science consumables.

According to Thermo, 2012 pro forma revenues for the combined company totaled $16.3 billion. Although Life made up only 23% of the combined company’s pro forma revenues, it has a leading position in key end-markets and technology segments. As the largest life science consumables company, Life is a major supplier to pharmaceutical and biotechnology companies and to academic and government labs. The firm is also a leading provider in a number of product markets, including PCR, molecular biology reagents and next-generation sequencers (NGS). Thermo gains a valuable addition to its business in the form of higher consumables revenues. For the combined company, consumables accounted for 61% of pro forma 2012 revenues. For Thermo’s 2012 revenues, consumables represented 55%.

On its conference call discussing the deal, Thermo highlighted four benefits of the acquisition. “First, it strengthens our strategic position, creating an unrivaled leader for research, specialty diagnostics and applied markets,” stated Thermo President and CEO Marc N. Casper. As he noted later in the call, both companies serve the research and discovery consumables, production, applied markets and specialty diagnostics segments. For research and discovery, both firms’ offerings include products for qPCR, molecular biology and sample preparation. For production, Thermo provides single-use bioprocess technologies, as well as associated media and sera, a market in which Life also participates. Life also supplies chromatography media for bioproduction. In the applied markets, both companies provide products for food safety, environmental testing and forensics. For specialty diagnostics, Thermo’s business is centered on transplant testing, microbiology and allergy testing, while Life’s is focused on NGS, qPCR and capillary electrophoresis sequencing opportunities. “With the addition of Life Technologies, better than two-thirds of our offerings will be differentiated by innovative technologies that are used by customers working in research labs, hospitals or in applied markets,” commented Mr. Casper.

Discussing additional benefits of the acquisition, Mr. Casper said, “For our customers, it brings two strong and complementary offerings together to strengthen our technology and innovation leadership,” giving as an example later in the call Thermo’s expertise in proteomics and Life’s strong position in genomics. Mr. Casper stated support for Life’s Ion Torrent NGS business, referring to its technology pipeline and role in diagnostics. He also said that Thermo has no plans at this time to divest any of Life’s businesses.

The third benefit highlighted by Mr. Casper was the combined company’s reach. “Life Technologies also expands our global commercial reach to make the combined company the ultimate customer partner.” He added, “Last, as a combined company, we’ll have an even stronger cash flow and adjusted EPS growth, and that’s a very compelling financial profile.”

The combined company’s commercial and financial resources also positions Thermo to grow its geographic, operational and customer opportunities. Regionally, it provides an expanded presence in Asia Pacific and emerging markets. Of the combined company’s 2012 pro forma sales, 18% were from Asia Pacific, versus 17% for Thermo alone. Life‘s investments in Asia-Pacific, which include distributors (see page 2), diagnostic partnerships and supply centers, provide Thermo with greater access to the region’s fast growing life science and healthcare markets.

Operationally, the combined company’s commercial infrastructure provides new capabilities. Referring to Life’s e-commerce capabilities in combination with Thermo’s catalog channel, Mr. Casper said, “We’ll have a commercial presence that no other company in the industry can match.” This customer access also extends to major accounts. Infrastructure additions include what Mr. Casper called Life’s “world-class inventory, logistics management, supply chain capabilities and cold chain.”

As with any acquisition, but especially larger ones, successful execution will be required.