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Renewed interest from private equity in outsourcing companies


Attracted by the relatively stable cash fl ows, a number of private equity (PE) investors are moving into the outsourcing space by acquiring contract manufacturing organisations (CMOs) and contract research organisations (CROs). For example, JLL Partners, a US PE fi rm specialising in healthcare, joined forces with Royal DSM to create a leading contract development and manufacturing organization.


Rationalisation can also create outsourcing opportunities. Companies with a suite of disjointed manufacturing locations are contracting out to CMOs to clean up their operations and make them more appealing to potential buyers.


KPMG’s Deal Thermometer suggests that the environment for pharmaceutical M&A activity will remain “Hot” for the remainder of 2014


Hot


• KPMG’s Deal Thermometer signals the environment for M&A deals in chemicals & pharmaceuticals.


Moderate


• It combines the appetite for deals (implied by changes in forward P/E ratios) with the capacity to fund deals (implied by changes in NetDebt/EBITDA multiples).


Cool


• ‘Hot’ signifi es an environment conductive to deal-making.


FURTHER EVIDENCE OF PORTFOLIO RATIONALISATION Bayer strengthens its oncology business


Having collaborated for several years with Norway’s Algeta to develop and commercialize the cancer drug Xofi go, Bayer AG has made a successful voluntary public takeover of the product.


Bayer recently announced that it may spin off its material science business, which would mark a further move away from ‘chemicals’ towards pharmaceutical products. It also builds on its recent acquisition of Merck’s consumer health business which has made it the number two OTC healthcare company after the GSK and Novartis partnership2


. Baxter unlocks value through spin-off


Baxter International has announced plans to spin off its biopharmaceuticals business, now called Baxalta. It will focus on selling its market leading portfolio of immunology and bleeding disorder treatments, whilst its medical products unit is keeping the name Baxter International and will continue to sell its drug delivery systems and hospital devices. This split refl ects a wider market trend to segment businesses with different customers and sales channels allowing operating models to become more aligned to customer needs, driving stronger growth and therefore value for shareholders. 2online.wsj.com/articles/bayer-plans-to-separate-materialscience-business-1410989328


KPMG’s Deal Capsule is a regular publication analyzing transactions in Chemicals and Pharmaceuticals To subscribe please email – Katharina Ashauer, kashauer@kpmg.com


© 2014 KPMG LLP, a UK limited liability partnership, and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.


DEAL CAPSULE


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