CAS Medical Systems acquired by Edwards Lifesciences: fairness opinion by William Blair
Deal terms
Opinion of William Blair to the target board
Discounted cash flow assumptions
Exit multiple methodology implied $1.10-$3.12 per share; perpetuity growth methodology implied $(0.72)-$0.30 per share. Unlevered FCF from after-tax EBIT at a 23% tax rate, less capex and increase in net working capital; discounted back to December 31, 2018; net debt as of December 31, 2018 deducted and divided by diluted shares as of January 31, 2019.
Selected public companies (14)
MISONIX, Inc. · Restoration Robotics Inc. · Viveve Medical, Inc. · AngioDynamics, Inc. · AtriCure, Inc. · Cardiovascular Systems, Inc. · CONMED Corporation · Glaukos Corporation · Intersect ENT, Inc. · LeMaitre Vascular, Inc. · Nevro Corp. · OrthoPediatrics Corp. · STAAR Surgical Company · Tactile Systems Technology, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue (micro cap peers) | 1.1x | 2.7x | 4.8x | — | — |
| EV / LTM Revenue (small cap peers) | 2.7x | 6.1x | 15.9x | — | — |
| EV / CY2019E Revenue (micro cap peers) | 0.9x | 2.5x | 4.3x | — | — |
| EV / CY2019E Revenue (small cap peers) | 2.6x | 5.5x | 11.9x | — | — |
Selected precedent transactions (18)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2018-12 | Buffalo Filter | CONMED Corporation | — |
| 2018-09 | Focal Therapeutics | Hologic | — |
| 2018-09 | Invuity | Stryker Corporation | — |
| 2018-03 | Cogentix Medical | Laborie Medical Technologies | — |
| 2017-12 | Entellus Medical | Stryker Corporation | — |
| 2017-06 | NOVADAQ Technologies | Stryker Corporation | — |
| 2016-09 | EndoChoice Holdings | Boston Scientific Corporation | — |
| 2016-06 | E.T. View Medical | Ambu A/S | — |
| 2016-05 | Smith & Nephew plc (Gynecology Business) | Medtronic | — |
| 2016-05 | Galil Medical | BTG | — |
| 2016-04 | Hansen Medical | Auris Health | — |
| 2015-09 | Synergetics USA | Valeant Pharmaceuticals | — |
| 2014-03 | New Wave Surgical Corporation | Covidien | — |
| 2013-12 | Patient Safety Technologies | Stryker Corporation | — |
| 2013-08 | Cardiocom | Medtronic | — |
| 2012-04 | Oridion Systems | Covidien | — |
| 2010-11 | O.R. Solutions | Ecolab | — |
| 2010-06 | Somanetics Corporation | Covidien | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 2.1x | 5.1x | 8.9x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| M&A Premiums Paid Analysis | Reviewed 238 acquisitions of U.S. publicly traded companies announced since January 1, 2014 with 100% of target equity acquired and equity values between $50M and $200M, comparing premiums 1 day, 1 week, 1 month, 90/180/270/365 days prior. Implied premiums at $2.45: 45.2% (1 day, $1.69), 40.0% (1 week, $1.75), 27.3% (1 month, $1.92), 30.3% (90 days, $1.88), (8.2)% (180 days, $2.67), 78.8% (270 days, $1.37), 129.2% (365 days, $1.07). 1-day and 1-week premiums fell between the 50th and 60th percentiles. | — |
Pursuant to letter agreement dated April 1, 2016, a $250,000 fairness opinion fee became payable upon delivery of the opinion; a fee of approximately $2,490,000, less any fees previously paid, becomes payable upon consummation of the merger. No portion of the fees was contingent on the conclusions reached.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $28.2M | $32.8M | $37.5M | $42.0M | 14.2% |
| Revenue growth | 14.3% | 16.3% | 14.3% | 12.0% | |
| EBITDA | $-2.3M | $1.2M | $3.1M | $5.0M | — |
| EBITDA growth | — | — | 158.3% | 61.3% | |
| EBITDA margin | -8% | 4% | 8% | 12% | |
| Implied EV / EBITDA | — | 83.5x | 32.3x | 20.0x |
Year-1 growth is against LTM at announcement ($24.7M revenue, $-2.3M EBITDA); later years are year over year.
CASMED management prepared standalone Forecasts for fiscal years 2019 through 2023, provided to William Blair on February 4, 2019. Revenue grows from $24.7 million in 2019 to $42.0 million in 2023; EBITDA is negative $(2.3) million in 2019 and 2020, turning positive at $1.2 million in 2021 and reaching $5.0 million in 2023; EBIT ranges from $(3.2) million in 2019 to $3.4 million in 2023. Earlier 2019 forecasts provided to Edwards and other bidders were superseded by these Forecasts and were not relied upon by William Blair or the board.
Process notes
Other Medical Devices and Supplies fairness opinions
- Wright Medical Group / StrykerCorp. 2019 · 14.6x EV/EBITDA
- Osiris Therapeutics / Smith & Nephew 2019 · 28.8x EV/EBITDA
- Varian Medical Systems / Siemens Healthineers 2020 · 29.4x EV/EBITDA
- K2M Group Holdings / StrykerCorp. 2018 · 92.0x EV/EBITDA
- Invuity / StrykerCorp. 2018
- Cogentix Medical / Laborie 2018 · 101.9x EV/EBITDA
All Medical Devices and Supplies opinions → · William Blair opinions