Syneos Health acquired by Elliott Investment Management / Patient Square Capital / Veritas Capital: fairness opinion by Centerview Partners
Announced May 10, 2023 · One-step merger · All cash ·
DEFM14A filed June 27, 2023
Enterprise value
$7.1B
EV / LTM EBITDA
9.7x
EBITDA $731M · 14% margin
EV / LTM revenue
1.38x
revenue $5.2B
DCF discount rate
12.0%–14.0%
Perpetuity growth
Deal terms
ConsiderationAll cash
Price per share$43.00
Premium—
Premium basis—
StructureOne-step merger
Termination fee$115M (2.5% of equity)
Reverse termination fee$275M
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $43.00 offer
Selected companies — EV / 2023E Adjusted EBITDA $31.25 – $44.75
Selected companies — EV / 2024E Adjusted EBITDA $32.75 – $48.75
Precedent transactions — EV / LTM Adjusted EBITDA $27.50 – $52.75
Discounted cash flow $30.50 – $47.00
Illustrative Discounted Future Share Price Analysis $31.75 – $54.50
Premia Paid Analysis $41.25 – $46.50
Analyst Price Target Analysis $28.00 – $51.00
Historical Stock Price Trading Analysis $25.75 – $38.25
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Centerview Partners to the target board
Delivered May 10, 2023 · Fee $52.0M ($49.0M contingent on closing), $3.0M on delivery of the opinion
Discounted cash flow assumptions
Discount rate12.0%–14.0%
BasisWACC determined using the Capital Asset Pricing Model, taking into account levered and unlevered betas for a comparable group of companies; mid-year convention
Terminal valuePerpetuity growth
Perpetuity growth2.5%–3.5%
Exit multiple5.6x–7.4x Implied EV/LTM Adjusted EBITDA on terminal year Adjusted EBITDA
Projection periodMarch 31, 2023 - December 31, 2032
Projections usedCompany Financial Forecasts (management)
Implied value per share$30.50–$47.00
Discounted to present value as of March 31, 2023; net debt as of March 31, 2023 subtracted.
Selected public companies (4)
Charles River Laboratories International, Inc. · ICON plc · IQVIA Holdings Inc. · Medpace Holdings, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2023E Adjusted EBITDA | 10.8x | 12.5x | 18.2x | 8.0x–10.0x | $31.25–$44.75 |
| EV / 2024E Adjusted EBITDA | 9.6x | 11.4x | 16.3x | 7.0x–9.0x | $32.75–$48.75 |
Selected precedent transactions (15)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2021-05 | UDG Healthcare plc | Clayton Dubilier & Rice | 17.6x EV/LTM Adjusted EBITDA |
| 2021-04 | PPD, Inc. | Thermo Fisher Scientific, Inc. | 23.4x EV/LTM Adjusted EBITDA |
| 2021-02 | PRA Health Sciences, Inc. | ICON plc | 24.4x EV/LTM Adjusted EBITDA |
| 2020-03 | Huntsworth plc | Clayton Dubilier & Rice | 10.4x EV/LTM Adjusted EBITDA |
| 2017-07 | Chiltern International Group Limited | Laboratory Corporation of America Holdings | 12.6x EV/LTM Adjusted EBITDA (as of December 31, 2017) |
| 2017-06 | PAREXEL International Corporation | Pamplona Capital Management | 13.3x EV/LTM Adjusted EBITDA |
| 2017-05 | inVentiv Health, Inc. | Syneos (f/k/a INC Research Holdings, Inc.) | 12.2x EV/LTM Adjusted EBITDA |
| 2016-08 | inVentiv Health, Inc. | Advent International Corporation | 11.2x EV/LTM Adjusted EBITDA |
| 2016-05 | IMS Health Holdings, Inc. | Quintiles Transnational Holdings Inc. | 13.0x EV/LTM Adjusted EBITDA |
| 2014-11 | Covance, Inc. | Laboratory Corporation of America Holdings | 13.3x EV/LTM Adjusted EBITDA |
| 2013-06 | PRA Health Sciences, Inc. | Kohlberg Kravis Roberts | 11.7x EV/LTM Adjusted EBITDA |
| 2011-10 | Pharmaceutical Product Development, Inc. | Hellman & Friedman LLC, The Carlyle Group | 10.2x EV/LTM Adjusted EBITDA |
| 2011-05 | Kendle International, Inc. | INC Research, LLC | 14.0x EV/LTM Adjusted EBITDA |
| 2010-05 | inVentiv Health, Inc. | Thomas H. Lee Partners, L.P. | 8.1x EV/LTM Adjusted EBITDA |
| 2007-07 | PRA International | Genstar Capital, LLC | 15.1x EV/LTM Adjusted EBITDA |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Adjusted EBITDA | 8.1x | 13.0x | 24.4x | 7.0x–10.5x | $27.50–$52.75 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Illustrative Discounted Future Share Price Analysis | Applied one-year forward Adjusted EBITDA multiples of 7.0x to 9.0x to estimated 2023, 2024 and 2025 Adjusted EBITDA, discounted at a 14.00% cost of equity. | $31.75–$54.50 |
| Premia Paid Analysis | Premiums in LBO change-of-control transactions since 2018 with transaction values of $5-15 billion; applied a 19% to 34% reference range to the $34.65 closing price on February 13, 2023. | $41.25–$46.50 |
| Analyst Price Target Analysis | Wall Street research analyst price targets per FactSet as of May 8, 2023 ranged from $28.00 to $51.00 per share. | $28.00–$51.00 |
| Historical Stock Price Trading Analysis | Closing prices from November 4, 2022 through February 13, 2023 ranged from $25.75 to $38.25 per share. | $25.75–$38.25 |
Aggregate fee of approximately $52 million, $3 million payable upon rendering of the opinion and the remainder contingent upon consummation of the Transactions.
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $5.3B | $5.6B | $6.1B | $6.6B | $7.1B | 7.7% |
| Revenue growth | 2.4% | 6.7% | 7.9% | 9.2% | 7.0% | |
| EBITDA | $859M | $999M | $1.1B | $1.3B | $1.4B | 13.5% |
| EBITDA growth | 17.5% | 16.3% | 15.0% | 15.9% | 7.0% | |
| EBITDA margin | 16% | 18% | 19% | 20% | 20% | |
| Implied EV / EBITDA | 8.3x | 7.1x | 6.2x | 5.3x | 5.0x |
Year-1 growth is against LTM at announcement ($5.2B revenue, $731M EBITDA); later years are year over year.
Management prepared the Company Forecasts covering 2023P-2032P, which were provided to the Board and to BofA and Centerview (2023-2027 also shared with Parent and other process participants). Revenue grows from $5,154 million in 2023 to $8,468 million in 2032; Adjusted EBITDA grows from $731 million in 2023 to $1,699 million in 2032. Unlevered free cash flow (Adjusted EBITDA less stock-based comp, taxes, capex, restructuring/transaction costs, adjusted for working capital) grows from $285 million in 2023 to $995 million in 2032, and assumes successful achievement of ongoing transformation initiatives (Project Velocity).
Process notes
Two financial advisors (BofA Securities and Centerview Partners) each delivered opinions to the Board; only the Centerview opinion section was provided in these slices, so BofA's analyses are not detailed here. The Board formed a Committee that oversaw parts of the process. The originally proposed go-shop provision was deleted in exchange for a reduction in the Company termination fee from 2.8% to 2.5% of equity value. Consortium 2 (Elliott/Patient Square/Veritas) initially proposed $41.25 per share before the final $43.00 price. Sponsors severally guarantee the Parent Termination Fee.
Other Pharmaceutical Services fairness opinions
- 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
- 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
All Pharmaceutical Services opinions → · Centerview Partners opinions