Fairness opinions › Pharmaceutical Services › 2024

Avid Bioservices acquired by GHO Capital Partners / Ampersand Capital Partners: fairness opinion by Moelis & Company

Announced November 6, 2024 · One-step merger · All cash · DEFM14A filed December 18, 2024

Pharmaceutical Services CDMO Sponsor: GHO Capital Partners LLP and Ampersand Capital Partners

Enterprise value

$1.1B

EV / LTM EBITDA

—

EV / LTM revenue

7.86x

revenue $140M

DCF discount rate

12.0%–17.0%

Exit multiple

Deal terms

ConsiderationAll cash

Price per share$12.50

Premium—

Premium basis—

StructureOne-step merger

Termination fee$32.0M (4.0% of equity)

Reverse termination fee$64.0M

Go-shopNone

Outside dateMay 6, 2025

FilingDEFM14A · EDGAR index

Implied value per share by method vs. $12.50 offer

Selected companies — EV / FY2026E Adj. EBITDA $5.72 – $10.57

Discounted cash flow $8.13 – $11.89

Discounted Cash Flow Analysis – Sensitivity A (informational only) $6.25 – $9.68

Discounted Cash Flow Analysis – Sensitivity B (informational only) $11.50 – $16.07

52-Week Low/High Company Per Share Price Analysis $4.07 – $12.48

Analyst Price Target Analysis $12.00 – $16.00

5-Year Strategic Return on Invested Capital $6.92 – $8.85

Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.

Opinion of Moelis & Company to the target board

Delivered November 6, 2024 · Fee $25.8M ($25.8M contingent on closing), $3.0M on delivery of the opinion

Discounted cash flow assumptions

Discount rate12.0%–17.0%

BasisEstimated range of Company's WACC derived using the Capital Asset Pricing Model and a size premium

Terminal valueExit multiple

Perpetuity growth—

Exit multiple17.0x–20.0x FY2029E Adjusted EBITDA

Projection periodFY2025E-FY2029E

Projections usedAvid management Projections (probability-adjusted five-year plan, 15.1% revenue CAGR)

Implied value per share$8.13–$11.89

Present values as of April 30, 2024 using mid-year discounting convention; implied equity value includes separate valuation of U.S. federal/state NOLs and California R&D tax credits. Terminal multiple range informed by current and ten-year average historical trading multiples of the Company and selected public CDMOs.

Selected public companies (5)

Bachem Holding AG · Catalent, Inc. · Lonza Group AG · Oxford Biomedica plc · PolyPeptide AG

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / FY2025E Adj. EBITDA	10.7x	23.7x	31.8x	—	—
EV / FY2026E Adj. EBITDA	9.8x	16.5x	21.4x	16.0x–27.0x	$5.72–$10.57

Other analyses

Analysis	Summary	Implied per share
Discounted Cash Flow Analysis – Sensitivity A (informational only)	Same DCF methodology, multiples and discount rates applied to Sensitivity A forecasts (12.3% implied revenue CAGR), inclusive of NPV of tax attributes.	$6.25–$9.68
Discounted Cash Flow Analysis – Sensitivity B (informational only)	Same DCF methodology, multiples and discount rates applied to Sensitivity B forecasts (18.9% implied revenue CAGR), inclusive of NPV of tax attributes.	$11.50–$16.07
52-Week Low/High Company Per Share Price Analysis	Historical trading prices for the common stock during the 52-week period ended November 5, 2024.	$4.07–$12.48
Analyst Price Target Analysis	One-year forward stock price targets in recently published Wall Street research analyst reports.	$12.00–$16.00
5-Year Strategic Return on Invested Capital	Theoretical purchase prices payable by a hypothetical strategic buyer based on Avid's estimated adjusted NOPAT for FY2025-FY2029, required return on invested capital of 7.00% to 9.00%, and illustrative synergies of 25% of estimated operating expenditures each year.	$6.92–$8.85

Retainer fee of $0.5M payable on execution of July 1, 2024 engagement letter and opinion fee of $3.0M payable upon substantial completion of work on the opinion, both offset against the transaction fee; transaction fee calculated by reference to fully diluted enterprise value implied by the Merger, currently estimated at approximately $25.8M, payable upon consummation. Moelis previously received $1.0M for advising a GHO portfolio company in a buy-side transaction completed in 2022.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	Year 5	CAGR
Revenue	$158M	$186M	$222M	$256M	$283M	15.7%
Revenue growth	12.9%	17.7%	19.4%	15.3%	10.5%
EBITDA	$24.0M	$32.0M	$45.0M	$60.0M	$73.0M	32.1%
EBITDA growth	—	33.3%	40.6%	33.3%	21.7%
EBITDA margin	15%	17%	20%	23%	26%
Implied EV / EBITDA	45.8x	34.4x	24.4x	18.3x	15.1x

Year-1 growth is against LTM at announcement ($140M revenue); later years are year over year.

Avid management, at the Board's direction, prepared non-public unaudited projections for fiscal years 2025 through 2029 based on a probability-adjusted five-year plan assuming a 15.1% implied revenue CAGR. The base Projections show total revenue of $158M in FY2025E growing to $283M in FY2029E, Adjusted EBITDA of $24M rising to $73M, and unlevered free cash flow of $10M rising to $37M. Management also prepared Sensitivity A (12.3% revenue CAGR) and Sensitivity B (18.9% revenue CAGR) standalone forecasts, given to the Board and Moelis for reference only; Moelis relied on the base Projections for its opinion.

Process notes

Single fairness opinion from Moelis & Company to the Avid board (no special committee). Going-private cash acquisition by funds managed by GHO Capital Partners and Ampersand Capital Partners, backed by equity commitment letters and limited guarantees plus debt financing. Two-tier reverse fee structure: $64M Reverse Termination Fee or $32M Regulatory Termination Fee (antitrust failure), with the guarantees capped at $64M in aggregate. Company Termination Fee of $32M equals 4% of implied equity value; outside date May 6, 2025 with automatic extension to November 6, 2025. Price negotiated up from $12.25 (Oct 17 proposal) to $12.30 (Oct 21) to $12.50 final; Party C was a competing bidder with a first-round bid high end of $12.00. Moelis considered but did not rely on revenue multiples; noted none of the selected companies were deemed directly comparable, and Catalent data was based on its unaffected stock price prior to reports of its potential acquisition. Moelis had previously provided services to a GHO portfolio company; William Blair advised GHO/Ampersand.

Other Pharmaceutical Services fairness opinions

Societal CDMO / CoreRx 2024 · 11.4x EV/EBITDA
Catalent / Novo Holdings / Novo Nordisk 2024 · 22.9x EV/EBITDA
Syneos Health / Elliott Investment Management / Patient Square Capital / Veritas Capital 2023 · 9.7x EV/EBITDA
PPD / Thermo Fisher Scientific 2021 · 20.3x EV/EBITDA
PRA Health Sciences / ICON 2021 · 19.2x EV/EBITDA
Cambrex / Permira Funds 2019 · 14.5x EV/EBITDA

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