2004 acquisitions keep instrument companies busy.
In the analytical and life science instrument industry, it appears there has been no slowdown in acquisition activity. Due to the size of acquisitions and the target markets, particularly the fast-changing market for life science techniques, economic worries play less of a role in delaying acquisitions. Indeed, many major instrument companies and associated suppliers have clearly stated their desire to make acquisitions and many have the cash to do so. Thermo Electron anticipates the ability to spend $1.6 billion in cash on acquisitions over the next three years, and Varian expects to boost its revenue growth by $100-$200 million through acquisitions.
However, as many instrument executives have lamented in the past, appropriate acquisition candidates are few and far between. Even if some companies were unable to find the "right" company at the "right" time, 2004 has been a busy year for acquisitions so far. During the last 12-and-a-half months since IBO's last survey, numerous instrument companies and associated suppliers have grown through acquisitions.
As in 2003, when GE bought Amersham, the analytical instrument industry saw another blockbuster deal this year that is expected to transform the laboratory products market. The $4.0 billion merger of Fisher Scientific International and Apogent Technologies (see IBO 3/31/04) once again indicates the value of having an sizable life science product offering. It also enlarges Fisher's manufacturing capabilities and its worldwide presence, as well as provides the company with entry, as a manufacturer, into new lab equipment and consumables markets.
Also continuing to significantly expand its product lines and add new businesses is Invitrogen. Its five acquisitions over the last 12 months targeted both small companies with innovative life science technologies (see IBO 11/30/03, 4/15/04, 9/15/ 04, 10/31/04) and provided entry into the testing services market (see IBO 12/31/03). In fact, service businesses were a particularly active area this year, with Thermo Electron purchasing two service-related companies, Laboratory Management Systems (see IBO 11/15/03) and US Counseling Services (see IBO 4/30/ 04), within the last 12 months. For both Thermo and Invitrogen, the number, size and diversity of their purchases highlight their desire to be complete suppliers in their respective markets, which should drive even more acquisitions in the future.
Although large acquisitions are nothing new to Invitrogen, Thermo Electron or Fisher Scientific, 2004 did mark the return of some companies to M&A deals after a relatively long absence. With its purchase of Silicon Genetics (see IBO 8/31/04), Agilent LSCA was once again active on the acquisition front after years on the sidelines. Kendro Laboratory Products was also considerably more active this year as it sought to drive growth in its mature lab equipment business by targeting faster-growing segments such as validation and quality services (see IBO 12/31/03) and lab automation (see IBO 3/31/04) through acquisitions. In September, Kendro completed its fourth acquisition in the past 12 months, purchasing Medical Air Technology, a maker of microbiological safety cabinets, laminar flow booths and ultra clean air environments, with annual revenue of $15 million.
Also announcing instrument-related purchases following a dry spell were British companies Whatman and Halma. Whatman announced a major purchase (see page 2), following two years of restructuring. Halma added two companies to its Optics and Specialist Technologies business through the acquisitions of molecular spectroscopy company Ocean Optics (see IBO 5/31/04) and fluid technologies firm Diba Industries (see IBO 5/15/04). For both Whatman and Halma, the renewed acquisition activity signals new business strategies.
Agilent's acquisition was just one of many software company purchases this year that underline the growing importance of in-house software expertise for instrument companies. Over the past 12 months, Waters (see IBO 1/ 31/04), Thermo Electron (see IBO 9/15/04), Rigaku (see IBO 10/15/04), Analytik Jena (see IBO 11/30/03) and Symyx (see page 2) have all purchased, or announced their intention to purchase, software companies. In addition to a product that can be integrated with multiple product lines, software company acquisitions can also provide instrument firms with a highly skilled workforce and high margin products.
Thermo's acquisition was also one of a handful this year that not only added to the company's existing product line, but dramatically expanded its market share for a particular technology. Other acquisitions this year that had such an effect included Carl Zeiss Jena GmbH's purchase of Bio-Rad Laboratory's confocal microscopy business (see IBO 5/31/04), which gave it the number 1 position in that market. Bio-Rad's purchase of MJ Research (see IBO 8/31/04) added to its market share in the highly competitive thermal cycler market. W.R. Grace & Company also increased its role in the chromatography market this year from primarily a column and packing material provider to an instrument provider and distributor with its acquisitions of Alltech (see IBO 6/15/04) and GROM ANALYTIK (see IBO 7/15/04). In addition, Whatman's recent plan to acquire Schleicher & Schuell (see page 2) will make it among the top 3 filtration providers worldwide.
In pursuit of the number 1 position in the explosives detection systems market, GE Infrastructure announced its intention to purchase InVision Technologies earlier this year (see page 2). Smiths also added to its security technology business, expanding its technology portfolio this year through the purchases of Cyrano Sciences (see IBO 3/15/04) and SensIR Technologies (see IBO 4/15/04).
Security technology is just one of several markets that have begun to take shape in the last few years and continued to evolve this year as a result of acquisition activity. Beckman Coulter (see IBO 12/15/03); Becton, Dickinson (see IBO 7/15/04) and Molecular Devices (see IBO 3/31/04) each acquired companies offering instrumentation for cell analysis. Both BD and Molecular Devices paid high premiums for their purchases. Financials were not available for Beckman Coulter's purchase of Q3DM. Also reflecting the high value of selected life science technologies, al though in the very different market of DNA amplification, was QIAGEN's purchase of Molecular Staging for 5.8 times its sales (see IBO 9/30/04).
QIAGEN joined Thermo Electron (see IBO 6/15/04), BD Biosciences (see IBO 10/15/04), Ciphergen Biosystems (see IBO 10/31/04) and MWG Biotech (see IBO 10/15/04) in making divestments during the past 12 months of instrument or instrument-related product lines. However, in the case of BD Biosciences and MWG Biotech's product lines, for which buyers have yet to be announced, it is also an example of life science product lines that have not proven a good fit.
QIAGEN's sale of its synthetic DNA business unit (see IBO 6/30/04) to management was one of four management buyouts of analytical instrument companies this year. In what has come to be more and more common for instrument companies with niche businesses or more mature product lines, Aurora Discovery (see IBO 12/15/ 04), Extrel (see IBO 5/31/04), AC Analytical Controls (see IBO 6/30/04) and SciGene (see IBO 10/15/04) were all acquired by current management.
Just ahead of GE's proposed acquisition of InVision in the ranking of the year's largest deals is Clayton, Dubilier & Rice's purchase of VWR International from Merck KGaA (see IBO 2/15/04). The acquisition not only represented changes for laboratory product distribution (see IBO 9/15/04), but was one of two notable acquisitions or instrument companies by private equity firms this year. Equity firm Ampersand Ventures purchased ESA (see IBO 5/31/04) last spring and just last month, it acquired Dynex Technologies (see IBO 10/31/04).
Also continuing to add to their analytical technology holdings this year were two companies with a more diverse orientation. Teledyne acquired Leeman Labs (see IBO 2/ 29/04) and ISCO (see IBO 6/30/04), two familiar names in the analytical instrument industry. Taylor Hobson Holdings (see IBO 6/30/04) became the latest addition to AMETEK's analytical product line.
Multiple acquisitions by companies were also not unusual this year. Building on its string of purchases that began last year was Varian, which added to its molecular spectroscopy business with the recent acquisitions of Digilab's assets (see IBO 9/15/04) and Magnex Scientific (see IBO 10/15/04). Also, Harvard Bioscience (see IBO 11/30/03, 3/15/04), Oxford Instruments (see IBO 9/15/04, 9/30/04) and Spectris (see IBO 11/15/03, 3/ 30/04) continued to make purchases during the last 12 months, each acquiring two companies with complementary product lines.
There were also those acquisitions and mergers that sought to revive the fortunes of companies with few sales and no operating profits. Both ACLARA BioSciences (see IBO 6/15/04) and Lynx Therapeutics (see IBO 9/ 30/04) announced mergers to bolster business through technology integration. In both cases, the mergers do not bring together two analytical instrument suppliers, but rather companies in different markets. ACLARA will merge with biotechnology company ViroLogic, and Solexa, an instrument company whose first products have yet to hit the market, with drug discovery service provider Lynx.
Valued at $180 million, the ACLARA and ViroLogic merger was one of seven deals announced this year worth more than $100 million. In addition to the acquisitions listed in the table on page 6, Newport's $300 million acquisition of Thermo Electron' Spectra Physics business also topped the $100 million mark.
US-based instrument firms accounted for the largest number of acquired companies during the past 12 months, followed by the UK and Germany. In fact, many major US companies acquired UK-based operations during the year, including Fisher Scientific, Invitrogen, AMETEK and Varian. However, European instrument companies were more likely to purchase firms closer to home, perhaps due to the weak US dollar.
Asian and European companies also engaged in cross-border acquisition activities. Bruker Optics purchased Chromex from Japanese company Hoya (see IBO 1/31/04), while Olympus bought German-based Soft Imaging Systems.
In 2004, instrument companies continued to build their product lines and market presence through acquisitions. In addition, many acquired new product lines with an eye toward the future. Next year should prove no different and may bring even more acquisition activity.
Top 5 Analytical Instrument Acquisitions Over $100 Million in 2004 Purchase Purchaser Acquired Price Fisher Scientific Int'l Apogent Technologies $4.0 Billion Clayton, Dubilier & Rice Merck VWR Int'l $1.7 Billion General Electric InVision Technologies $900 Million Invitrogen BioReliance $500 Million Fisher Scientific Int'l Oxoid $330 Million Acquired Co.'s Purchaser Sales FY 2003 Date Completed Fisher Scientific Int'l $587 Million August 2004 Clayton, Dubilier & Rice $2.7 Billion April 2004 General Electric $417 Million Est. December 2004 Invitrogen $90 Million February 2004 Fisher Scientific Int'l $155 Million March 2004 Most Analytical Instrument Acquisitions in 2004 Company Number of Acquisitions Invitrogen 5 Kendro Laboratory Products (SPX) 4 Apogent Technologies 3 Fisher Scientific Int'l 3 Thermo Electron 3 Top 5 Premiums Paid for Companies with Sales Over $10 Million in 2004 Acquired Purchase Co.'s Sales Purchaser Acquired Price FY 2003 Fisher Scientific Int'l Apogent $4.0 Billion $587 Million Technologies Invitrogen BioReliance $500 Million $90 Million Fisher Scientific Int'l Dharmacon $80 Million $17 Million Molecular Devices Axon $140 Million $34 Million Instruments Thermo Electron InnaPhase $65 Million $26 Million Price to Date Purchaser Sales Ratio Completed Fisher Scientific Int'l 6.8 August 2004 Invitrogen 5.6 February 2004 Fisher Scientific Int'l 4.7 February 2004 Molecular Devices 4.2 July 2004 Thermo Electron 2.5 September 2004 Top 5 High-Value Deals for Companies with Sales Over $10 Million in 2004 Purchase Purchaser Acquired Price Clayton, Dubilier & Rice Merck VWR Int'l $1.7 Billion Varian Digilab Assets $14 Million Whatman Schleicher & Schuell GmbH $61 Million Thermo Electron Laboratory Management Systems $12 Million Halma Diba Industries $14 Million Price to Purchaser Acquired Co.'s Sales Sales FY 2003 Ratio Date Completed Clayton, Dubilier & Rice $2.7 Billion 0.6 April 2004 Varian $15 Million 0.9 September 2004 Whatman $60 Million 1.0 Est. December 2004 Thermo Electron $11 Million 1.1 November 2003 Halma $12 Million 1.2 May 2004
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|Publication:||Instrument Business Outlook|
|Date:||Nov 15, 2004|
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