Fairness opinions › Medical Devices and Supplies › 2024

Surmodics acquired by GTCR: fairness opinion by Jefferies

Announced May 29, 2024 · One-step merger · All cash · DEFM14A filed July 8, 2024

Medical Devices and Supplies Medical Devices Sponsor: GTCR LLC

Enterprise value

$616M

equity $627M

EV / LTM EBITDA

36.9x

EBITDA $16.7M · 14% margin

EV / LTM revenue

4.98x

revenue $124M

DCF discount rate

13.1%–14.1%

Exit multiple

Deal terms

ConsiderationAll cash

Price per share$43.00

Premium—

Premium basis—

StructureOne-step merger

Termination fee$20.4M (3.3% of equity)

Reverse termination fee$47.0M

Go-shopNone

Outside date—

FilingDEFM14A · EDGAR index

Implied value per share by method vs. $43.00 offer

Selected companies — EV / CY2024E EBITDA $21.50 – $26.20

Selected companies — EV / CY2025E EBITDA $31.28 – $37.57

Precedent transactions — TV / LTM Revenue $23.73 – $31.62

Discounted cash flow $39.34 – $45.89

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

Opinion of Jefferies to the target board

Delivered May 27, 2024 · Fee $7.5M ($6.0M contingent on closing)

Discounted cash flow assumptions

Discount rate13.1%–14.1%

Basisselected range of discount rates

Terminal valueExit multiple

Perpetuity growth—

Exit multiple13.0x–15.0x FY2028E adjusted EBITDA

Projection periodlast two quarters of FY2024E-FY2028E

Projections usedSurmodics management projections (finalized May 2024)

Implied value per share$39.34–$45.89

Present values calculated as of March 31, 2024; stock-based compensation treated as a cash expense.

Selected public companies (6)

Asahi Intecc Co., Ltd. · Integer Holdings Corporation · Nolato AB (publ) · Sotera Health Company · Tecan Group AG · UFP Technologies, Inc.

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / CY2024E EBITDA	9.6x	16.0x	24.0x	16.0x–19.5x	$21.50–$26.20
EV / CY2025E EBITDA	8.9x	14.5x	21.7x	14.5x–17.5x	$31.28–$37.57

Selected precedent transactions (15)

Date	Target	Acquirer	Multiple
2024-01	Pulse Technologies, Inc.	Integer Holdings Corporation	—
2023-10	Paragon Medical Corp.	AMETEK, Inc.	—
2023-07	Klingel Holding GmbH	Elos Medtech AB	—
2023-05	Spectrum Plastics Group	DuPont de Nemours, Inc.	—
2023-01	Memry Corporation / SAES Smart Materials, Inc. (Nitinol Business)	Resonetics, LLC	—
2022-02	Intricon Corporation	Altaris Capital Partners, LLC	—
2021-12	Norwood Medical	Heraeus Holding GmbH	—
2021-07	Intech Group	Montagu Private Equity LLP	—
2021-06	Paramit Corporation	Tecan Group AG	—
2021-01	Scapa Group Plc	Schweitzer-Mauduit International, Inc.	—
2020-01	RTI Surgical Holdings (Surgical OEM Business)	Montagu Private Equity LLP	—
2019-10	Marle Group	Dentressangle SAS	—
2018-05	Integer Holdings Corporation (Advanced Surgical & Orthopedics Business)	MedPlast, LLC	—
2018-04	PMG Intermediate Holding Corporation	NN, Inc.	—
2017-10	CeramTec Group	BC Partners / The Public Sector Pension Investment Board / Ontario Teachers' Pension Plan	—

Multiple	Low	Median	High	Range applied	Implied per share
TV / LTM Revenue	1.3x	3.5x	6.9x	3.0x–4.0x	$23.73–$31.62

Aggregate fee currently estimated at approximately $7.5 million, of which a portion was payable upon delivery of the opinion and approximately $6 million is contingent upon consummation of the merger. Jefferies and affiliates received or expect to receive approximately $15 million in fees from GTCR and its affiliates/portfolio companies over the prior two years.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	CAGR
Revenue	$145M	$179M	$216M	$255M	20.7%
Revenue growth	17.2%	23.5%	20.8%	18.0%
EBITDA	$27.4M	$42.1M	$61.7M	$80.0M	42.9%
EBITDA growth	64.1%	53.6%	46.6%	29.7%
EBITDA margin	19%	24%	29%	31%
Implied EV / EBITDA	22.5x	14.6x	10.0x	7.7x

Year-1 growth is against LTM at announcement ($124M revenue, $16.7M EBITDA); later years are year over year.

Management prepared projections for fiscal years ending September 30, 2024 through 2028, finalized in May 2024 and provided to the board, GTCR and Jefferies. Total revenue grows from $123.6 million in FY2024E to $254.9 million in FY2028E, with adjusted EBITDA rising from $16.7 million to $80.0 million and GAAP operating income from a $(5.1) million loss to $58.7 million. Unlevered free cash flow (calculated by Jefferies from the projections) ranges from $(2) million in the last six months of FY2024E to $45 million in FY2028E; management also identified potential cost synergies of $3.9-$4.5 million of public company costs plus $0.8 million of facility rent annually for FY2025-FY2028.

Process notes

Single fairness opinion delivered by Jefferies to the Surmodics board on May 27, 2024 (oral, confirmed in writing). All-cash going-private sale to GTCR-backed Parent. Company termination fee of $20.38 million equals approximately 3.25% of equity value (implying equity value of roughly $627 million); Parent reverse termination fees of $50.17 million (regulatory) and $47.03 million (other), guaranteed by GTCR Funds under a limited guarantee capped at $53.17 million. No go-shop; no-shop with fiduciary out and four business-day matching right, plus a 12-month tail on the termination fee. Jefferies disclosed significant prior and ongoing relationships with GTCR (approximately $15 million of fees over two years) and none with Surmodics.

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All Medical Devices and Supplies opinions → · Jefferies opinions