By Greg Roumeliotis
Feb 23 Private equity firm Cinven Ltd has agreed
to acquire pharmaceutical contract research organization Medpace
Inc from buyout firm CCMP Capital Advisors LLC for a little over
$900 million, two people familiar with the matter said on
The deal could be announced as early as Monday, the people
said, asking not to be identified because they were not
authorized to discuss the transaction ahead of an official
Cinven and CCMP declined to comment, while a Medpace
representative did not immediately respond to requests for
Founded in 1992, Medpace helps pharmaceutical companies with
clinical studies that are required for the regulatory approval
of their products. It specializes in assisting small- and
medium-sized biotechnology companies.
The contract research organization (CRO) industry has
benefited in recent years from the pharmaceutical companies'
drive to cut costs, reduce clinical trial times and expand their
research and development (R&D) presence around the world.
"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 in a Feb.
18 research note on the industry.
London-based Cinven focuses on European investments, but
pursued Medpace because of the company's substantial presence in
Europe, as well as the opportunity to expand its business in
Asia, where Cinven already has a team of professionals working
with its portfolio companies, the sources said.
About 40 percent of Cincinnati, Ohio-based Medpace's
employees working in its clinical operations are in Europe.
Medpace has a total of more than 1,500 employees in over 45
countries and generated adjusted earnings before interest, tax,
depreciation and amortization in 2013 of $94 million.
Cinven also decided to bid for Medpace because of the CRO
industry's appeal to the European private equity firm. Cinven
was one of the buyout firms that pursued another U.S.-based
clinical trials firm last year called PRA International, people
familiar with the matter told Reuters at the time.
It lost out to KKR & Co LP, which acquired PRA for
around $1.3 billion and later merged it with a smaller peer,
called ReSearch Pharmaceutical Services Inc, which it acquired
from Warburg Pincus LLC.
Cinven prevailed over private equity peers GTCR LLC and
Summit Partners in the last stages of the auction for Medpace,
one of the sources said.
Representatives of GTCR and Summit Partners did not
immediately respond to requests for comment.
Reuters reported in November that CCMP had hired Jefferies
Group LLC to find a buyer for Medpace.
CCMP put up $200 million as equity and arranged a $285
million term loan to acquire an 80 percent stake in Medpace in
2011, according to a credit research note at the time from
Moody's Investors Service Inc.
CCMP now stands to make three times its original investment
on the deal, according to a person familiar with CCMP's fund who
spoke on condition of anonymity because this information is not
Buyout firms typically hold companies for a period of three
to seven years. CCMP's decision to explore a sale relatively
early on underscores the sector's attraction for private equity
Other leveraged buyouts in the sector included the $3.9
billion acquisition of Pharmaceutical Product Development Inc by
Carlyle Group LP and Hellman & Friedman LLC in 2011, and
the $1.1 billion takeover of inVentiv Health Inc by an investor
group led by Thomas H. Lee Partners LP, also in 2011.
CCMP is close to wrapping up fundraising for its next $3.5
billion flagship fund. Cinven completed raising its latest fund
last year, amassing 5.3 billion euros ($7.3 billion).