PRA Health Sciences acquired by ICON: fairness opinion by Centerview Partners and BofA Securities and UBS
Deal terms
Each share of PRA common stock converted into 0.4125 of one ICON ordinary share plus $80.00 in cash. Implied value of $166.06 per share based on ICON's $208.62 closing price on February 23, 2021 ($165.90 based on the February 22, 2021 closing price of $208.25).
Implied value per share by method vs. $80.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Centerview Partners to the acquirer board
Discounted cash flow assumptions
Stand-alone PRA DCF excluding synergies: $113-$165. Including cost synergies only: $130-$191. Including cost and tax synergies: $144-$211. Using PRA management's financial forecasts (same discount/terminal rates): $134-$197. Separate ICON DCF (2021-2030, 8.75%-10% discount rate, 2.5%-3.5% perpetuity growth) implied $178-$239 per ICON ordinary share.
Selected public companies (5)
ICON plc (ICLR) · IQVIA Holdings Inc. (IQV) · Medpace Holdings, Inc. (MEDP) · PPD, Inc. (PPD) · Syneos Health, Inc. (SYNH)
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2021E Adjusted EBITDA (PRA peer set) | 13.8x | — | 26.4x | 14.0x–19.0x | $116.00–$159.00 |
| Price / 2021E Adjusted EPS (PRA peer set) | 17.4x | — | 36.1x | 18.0x–26.0x | $109.00–$158.00 |
| EV / 2021E Adjusted EBITDA (ICON peer set; implied per ICON share) | 13.8x | — | 26.4x | 14.0x–19.0x | $170.00–$227.00 |
| Price / 2021E Adjusted EPS (ICON peer set; implied per ICON share) | 17.4x | — | 36.1x | 18.0x–26.0x | $159.00–$229.00 |
Selected precedent transactions (10)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2017-07 | Chiltern International Inc. | Laboratory Corporation of America Holdings | — |
| 2017-06 | PAREXEL International Corporation | Pamplona Capital Management LLC | — |
| 2017-05 | inVentiv Health, Inc. | INC Research, LLC | — |
| 2016-08 | inVentiv Health, Inc. | Advent International Corp | — |
| 2016-05 | IMS Health Holdings, Inc. | Quintiles Transnational Holdings Inc. | — |
| 2014-11 | Covance Inc. | Laboratory Corporation of America Holdings | — |
| 2013-06 | PRA Health Sciences, Inc. | KKR & Co. Inc. | — |
| 2011-10 | PPD, Inc. | Carlyle Group Inc. | — |
| 2011-05 | Kendle International Inc. | INC Research, LLC | — |
| 2007-07 | PRA Health Sciences, Inc. | Genstar Capital, LLC | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Adjusted EBITDA | 10.2x | 12.8x | 15.1x | 10.0x–15.0x | $63.00–$100.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Price Trading Analysis (PRA, 52-week to 2/22/2021) | Range of low and high closing prices of PRA common stock over 52 weeks prior to February 22, 2021, compared with Consideration of $165.90. | $64.00–$137.00 |
| Analyst Price Target Analysis (PRA) | Wall Street research analyst price targets for PRA available on Bloomberg as of February 22, 2021. | $105.00–$145.00 |
| Premiums Paid Analysis | Premiums paid in selected transactions since 2010 with transaction value of $5 billion or more having similar stock components; applied a 20%-40% premium range to PRA's February 22, 2021 closing price of $127.30. | $153.00–$178.00 |
| Historical Stock Price Trading Analysis (ICON, 52-week) | 52-week low/high closing prices of ICON ordinary shares prior to February 22, 2021 vs. the $208.25 closing price. | $116.00–$221.00 |
| Analyst Price Target Analysis (ICON) | Wall Street analyst price targets for ICON ordinary shares as of February 22, 2021 vs. $208.25 closing price. | $179.00–$240.00 |
| Illustrative Has/Gets Analysis | Compared ICON's stand-alone equity value to pro forma equity value including Synergies; implied pro forma market value of approximately $11.6 billion or $217.00 per share vs. $11.2 billion or $208.25 per share as of February 22, 2021. | $217.00 |
| Illustrative Future Share Price Analysis | Illustrative future value per ICON ordinary share for calendar years 2021-2025, stand-alone vs. pro forma, using NTM P/E multiples of 24.1x (ICON stand-alone), 22.8x (blended) and 20.0x applied to NTM Adjusted EPS estimates. | — |
| Relative Value Analysis (implied cash-adjusted exchange ratios) | Implied cash-adjusted exchange ratios: Selected Trading Companies (2021E EV/Adj. EBITDA) 0.1572x-0.4660x; Selected Trading Companies (2021E P/Adj. EPS) 0.1269x-0.4890x; DCF exclusive of synergies 0.1368x-0.4768x; DCF cost synergies only 0.2094x-0.6198x; DCF cost and tax synergies 0.2675x-0.7342x, compared to the 0.4125x exchange ratio. | — |
ICON agreed to pay Centerview an aggregate fee of $30 million, $5 million payable upon rendering of the opinion and $25 million contingent upon consummation; plus expense reimbursement and indemnity.
Opinion of BofA Securities to the target board
Discounted cash flow assumptions
Mid-year discounting convention, present value as of December 31, 2020. Separate ICON DCF (2021-2025, 7.25%-9.5% discount rate, 13.0x-17.5x exit multiple) implied $183-$252 per ICON ordinary share.
Selected public companies (6)
IQVIA Holdings Inc. (IQV) · Charles River Laboratories International, Inc. (CRL) · PPD, Inc. (PPD) · Syneos Health, Inc. (SYNH) · MedPace Holdings, Inc. (MEDP) · ICON plc (ICLR)
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2021E EBITDA (SBC-Unburdened) - PRA | 13.7x | 17.2x | 24.2x | 14.0x–17.5x | $118.00–$149.00 |
| EV / 2022E EBITDA (SBC-Unburdened) - PRA | 12.4x | 15.7x | 20.2x | 12.5x–16.0x | $124.00–$161.00 |
| Price / 2021E EPS (SBC/Amort.-Unburdened) - PRA | 17.2x | 25.9x | 32.1x | 18.0x–25.0x | $112.00–$155.00 |
| Price / 2022E EPS (SBC/Amort.-Unburdened) - PRA | 15.1x | 22.2x | 27.3x | 15.5x–22.0x | $112.00–$159.00 |
| EV / 2021E EBITDA (SBC-Unburdened) - ICON (per ICON share) | — | 17.2x | — | 15.5x–18.0x | $187.00–$216.00 |
| EV / 2022E EBITDA (SBC-Unburdened) - ICON (per ICON share) | — | 15.6x | — | 14.0x–16.5x | $187.00–$219.00 |
| Price / 2021E EPS (SBC/Amort.-Unburdened) - ICON (per ICON share) | — | 24.9x | — | 20.0x–26.0x | $182.00–$236.00 |
| Price / 2022E EPS (SBC/Amort.-Unburdened) - ICON (per ICON share) | — | 21.5x | — | 17.0x–22.5x | $169.00–$224.00 |
Selected precedent transactions (5)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2017-06-20 | Parexel International Corporation | Pamplona Capital Management, LLP | — |
| 2017-05-10 | InVentiv Health, Inc. | INC Research Holdings, Inc. | — |
| 2017-04-26 | PPD, Inc. | H&F, ADIA, GIC and The Carlyle Group | — |
| 2016-05-03 | Quintiles Transnational Holdings Inc. | Ims Health Holdings, Inc. | — |
| 2014-11-03 | Covance | Laboratory Corporation of America Holdings | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (SBC-Unburdened) | 11.5x | 12.4x | 14.5x | — | — |
| EV / FY EBITDA (SBC-Unburdened) | 10.8x | 12.1x | 13.5x | — | — |
| EV / FY+1 EBITDA (SBC-Unburdened) | 9.8x | 10.6x | 12.7x | — | — |
| EV / CY2020E EBITDA (SBC-Unburdened) applied to PRA | — | — | — | 12.0x–14.0x | $78.00–$93.00 |
| EV / CY2021E EBITDA (SBC-Unburdened) applied to PRA | — | — | — | 11.0x–13.0x | $91.00–$109.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| 52-Week Trading Range (PRA) | PRA common stock trading range for the 52-week period ended February 23, 2021. | $64.14–$136.53 |
| Wall Street Analysts Price Targets (PRA) | Publicly available equity research analyst price targets for PRA as of February 23, 2021, discounted by one year at PRA's estimated cost of equity of 9.5%. | $100.00–$132.00 |
| 52-Week Trading Range (ICON) | ICON ordinary shares trading range for the 52-week period ended February 23, 2021. | $115.95–$220.96 |
| Wall Street Analysts Price Targets (ICON) | Equity research analyst price targets for ICON ordinary shares as of February 23, 2021, discounted by one year at ICON's estimated cost of equity of 8.5%. | $165.00–$221.00 |
| Has/Gets Analysis | Compared PRA stand-alone per share equity value reference range of $141-$193 to total implied pro forma value to be received per PRA share in the merger of $157-$199 (pro forma ICON value x 0.4125 plus $80 cash), incorporating present value of Cost Savings and Tax Savings discounted at 7.5%-10.0% with terminal perpetuity growth of 0% for Cost Savings and 0%-3.0% for Tax Savings. | $157.00–$199.00 |
Aggregate fee estimated at approximately $30 million, $2 million payable upon delivery of the opinion and the remainder upon closing. BofA and affiliates derived approximately $4 million in revenues from PRA for corporate/investment banking services from February 1, 2019 through January 31, 2021.
Opinion of UBS to the target board
Discounted cash flow assumptions
Present value as of December 31, 2020. Separate ICON stand-alone DCF (2021-2025, 9.0%-10.0% discount rate, 15.0x-16.0x terminal multiple) implied $200.16-$218.66 per ICON ordinary share. A pro forma combined company DCF was also performed reflecting synergies of $150 million annual run-rate by end of 2025 and a combined effective tax rate declining to 14% by end of 2024, discounted at 9.0%-10.0% with 15.0x-16.0x terminal multiples, then discounted to December 31, 2020 at a 10.5% cost of equity.
Selected public companies (8)
Pharmaceutical Product Development, Inc. (PPD) · ICON plc (ICLR) · Medpace Holdings, Inc. (MEDP) · IQVIA Holdings Inc. (IQV) · Syneos Health, Inc. (SYNH) · Charles River Laboratories International, Inc. (CRL) · PRA Health Sciences, Inc. (PRAH) · Laboratory Corporation of America Holdings (for reference only) (LH)
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2021E Adj. EBITDA (PRA analysis) | 13.7x | 17.7x | 24.2x | 16.5x–17.5x | $151.27–$162.13 |
| EV / 2022E Adj. EBITDA (PRA analysis) | 12.4x | 16.2x | 20.2x | 15.0x–16.0x | $140.87–$150.11 |
| EV / 2021E Adj. EBITDA (ICON analysis; per ICON share) | 13.7x | 17.2x | 24.2x | 16.5x–17.5x | $198.71–$210.19 |
| EV / 2022E Adj. EBITDA (ICON analysis; per ICON share) | 12.4x | 15.6x | 20.2x | 15.0x–16.0x | $199.97–$212.69 |
Selected precedent transactions (6)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2017-06-20 | Parexel International Corporation | Pamplona Capital Management, LLP | 12.5x EV / LTM Adj. EBITDA |
| 2017-05-10 | inVentiv Health, Inc. | INC Research Holdings, Inc. | 12.2x EV / LTM Adj. EBITDA |
| 2017-04-26 | Pharmaceutical Product Development, Inc. | Hellman & Friedman LLC, The Carlyle Group Inc., GIC Private Ltd, Abu Dhabi Investment Authority | 13.9x EV / LTM Adj. EBITDA |
| 2016-05-03 | IMS Health Holdings, Inc. | Quintiles Transnational Holdings Inc. | 14.5x EV / LTM Adj. EBITDA |
| 2016-05-03 | Quintiles Transnational Holdings Inc. | IMS Health Holdings, Inc. | 11.5x EV / LTM Adj. EBITDA |
| 2014-11-03 | Covance Inc. | Laboratory Corporation of America Holdings | 12.1x EV / LTM Adj. EBITDA |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Adj. EBITDA | 11.5x | 12.4x | 14.5x | 12.5x–14.5x | $83.30–$98.49 |
| EV / FY+1 Adj. EBITDA | 10.8x | 12.1x | 13.5x | 12.0x–13.5x | $99.29–$113.15 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Pro Forma Combined Company Discounted Cash Flow Analysis | DCF of the combined company using PRA and ICON forecasts adjusted for estimated synergies ($150 million annual run-rate by end of CY2025) and one-time costs to achieve, cash flows July 1, 2021 through December 31, 2025 discounted at 9.0%-10.0%, terminal value based on FY2025 LTM Adj. EBITDA at 15.0x-16.0x multiples, results discounted to December 31, 2020 at a 10.5% cost of equity. | — |
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $4.1B | $4.5B | $4.8B | $5.2B | 8.0% |
| Revenue growth | 9.3% | 8.7% | 7.8% | 7.4% | |
| EBITDA | $723M | $818M | $910M | $1.0B | 12.0% |
| EBITDA growth | 17.6% | 13.1% | 11.2% | 11.5% | |
| EBITDA margin | 18% | 18% | 19% | 20% | |
| Implied EV / EBITDA | 16.3x | 14.4x | 12.9x | 11.6x |
Year-1 growth is against LTM at announcement ($3.8B revenue, $615M EBITDA); later years are year over year.
Three sets of forecasts were used: PRA management's stand-alone forecasts ("financial forecasts by PRA"), ICON management's forecasts for ICON ("ICON Forecasts"), and ICON management's adjusted forecasts for PRA ("ICON-Adjusted PRA Forecasts"). Centerview used the ICON-Adjusted PRA Forecasts and ICON Forecasts over 2021-2030 for its DCFs; BofA and UBS used the PRA and ICON forecasts over 2021-2025. PRA's LTM Adjusted EBITDA as of December 31, 2020 was $492 million. ICON management projected synergies reaching an annual run-rate of approximately $150 million by the end of CY2025 plus tax savings from a combined effective tax rate declining to 14% by the end of CY2024.
Process notes
Other Pharmaceutical Services fairness opinions
- PPD / Thermo Fisher Scientific 2021 · 20.3x EV/EBITDA
- Syneos Health / Elliott Investment Management / Patient Square Capital / Veritas Capital 2023 · 9.7x EV/EBITDA
- Cambrex / Permira Funds 2019 · 14.5x EV/EBITDA
- Avid Bioservices / GHO Capital Partners / Ampersand Capital Partners 2024
- Societal CDMO / CoreRx 2024 · 11.4x EV/EBITDA
- Catalent / Novo Holdings / Novo Nordisk 2024 · 22.9x EV/EBITDA
All Pharmaceutical Services opinions → · Centerview Partners opinions · BofA Securities opinions · UBS opinions