Cinven swoops in to buy control of CRO Medpace for $915M

Medpace Corporate Headquarters

Cinven may have lost the bidding war for PRA, but the $915 million price for a majority stake in the CRO Medpace turned out just right.

The private equity group announced this morning that it will buy out Medpace, continuing an M&A trend that has spurred a sizable shakeout of the CRO business in recent years. With outsourcing growing increasingly popular in the biopharma industry, the financiers are finding some significant upside in buying--and then selling--CROs.

For its cash Cinven is gaining a Cincinnati-based CRO with more than 1,500 staffers in 45 countries; more than half of them working in Europe with a growing presence in Asia. Cinven was attracted to Medpace's core group of clients: small and mid-sized biotech companies with a product in the clinic. Last year Cinven says the group produced an EBITDA of $94 million, leaving the acquisition price at just under 10x.

Why all the buyout activity in CROs? Small and medium-sized biotechs have been routinely outsourcing clinical trial work while Big Pharma has been turning to CROs to streamline costs and reduce the ranks of employees on the payroll. That's what drove KKR to beat out Cinven in the bidding for PRA, which sold for $1.3 billion. And some analysts say the trend has yet to play out.

"We estimate only about half of R&D is outsourced, with an opportunity for large CROs to pick up a substantial portion of the 7 to 10 percentage points of spend that could be outsourced in the next several years," Citi equity analysts wrote recently, according to a report in Reuters, which broke the story Sunday night. And some of the private equity groups have been assembling global operations through their buyouts.

Company founder and CEO August Troendle will stay at the helm of the business. The management team is a minority owner in the business, and they'll be looking to see some gains when Cinven gets around to cashing out of this investment.

"Medpace has a highly experienced management team and a strong market positioning, with growth in Europe and Asia presenting a real opportunity for the business," says Cinven principal Alex Leslie. "The Cinven team is well placed to accelerate this growth given our considerable European presence and also the strength of our Asia portfolio team--which has been instrumental in the success of international businesses in the region."

- here's the release