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 Sunday.
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 announcement.
Cinven and CCMP declined to comment, while a Medpace representative did not immediately respond to requests for comment.
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 February 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 (KKR.N), 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 public.
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 buyers.
Other leveraged buyouts in the sector included the $3.9 billion acquisition of Pharmaceutical Product Development Inc by Carlyle Group LP (CG.O) 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).
(Additional reporting by Olivia Oran in New York; Editing by Marguerita Choy and Jan Paschal)