Kohlberg Kravis Roberts has jumped into the contract research business in style. The private equity group reportedly paid $1.3 billion for PRA International, a CRO with a global reach into 80 countries. And the deal may well augur more such buyouts as the CRO industry continues on a steady pace of mergers and acquisitions.
PRA boasts a track record on 2,000 clinical trials over the past 12 years. Genstar Capital paid $797 million for the company back in 2007 and then tried to sell it four years later. That effort was scrapped, though, as bids came in too low. More recently, PRA was floating the idea of going public, like Quintiles ($Q) did recently. But that may have been just window dressing to help spur along the buyout talks. KKR was reportedly at the bidding table with Warburg Pincus and Cinven, setting the stage for a rich deal.
A group of CROs has thrived in recent years as Big Pharma turned increasingly to the service companies for much of its trial work.
"Over the past several years, we have witnessed a dramatic increase in M&A within the pharma services industry," noted Sterne Agee analyst Greg T. Bolan, "with 17 moderate-to-large deals occurring over the past four years. Based on our knowledge of these deals, we believe valuations have ranged from 10.0x to 14.0x TTM EBITDA. If PRA was sold for $1.3B and our TTM $95MM EBITDA estimate is correct, KKR paid top dollar for the company."
"As one of the fastest growing companies in the CRO sector, PRA is known for its strong client relationships and differentiated therapeutic expertise," said Jim Momtazee, the head of KKR's healthcare investing team, in a statement. "PRA management and KKR share the common ambition of building on this platform by continually improving service offerings to clients and providing compelling career opportunities for employees."
Jefferies acted as the exclusive adviser to PRA International during the transaction.
- here's the press release
- read the story from The New York Times