February 24, 2014 5:23 pm

Cinven buys research group Medpace

Cinven, the European private equity firm, has bought US-based pharmaceutical research company Medpace from CCMP, the former buyout arm of JPMorgan, for $915m.

The acquisition adds to a rush of M&A activity in the health sector this year, with the value of deals already four times greater than the amount completed in the first quarter of 2013.

Private equity companies have been especially interested in contract research companies such as Medpace as a way to tap into the rich seam of research and development spending by big pharma companies.

Outsourcing of clinical trials has been a growing trend in the industry as drugmakers look to cut costs and increase productivity from R&D.

KKR last year bought PRA International, another US-based clinical research company, for $1.3bn from Genstar Capital, a rival buyout company.

Analysts at Citigroup this month estimated that only about half of R&D spending by drug companies is outsourced, leaving plenty of room for more growth among research contractors.

Supraj Rajagopalan, partner at Cinven, said Medpace occupied an especially attractive niche in the sector.

“Consolidation has created a gap in the market serving the mid-cap pharma and smaller biotech players – where Medpace operates and where we intend to capitalise on organic growth opportunities.”

Based in Cincinnati, Ohio, the company has more than 1,500 employees in over 45 countries and generated adjusted earnings before interest, tax, depreciation and amortisation in 2013 of $94m.

About 40 per cent of its research employees are in Europe and August Troendle, Medpace chief executive and founder, said the company was keen to use Cinven’s investment and expertise to help it expand in Asia.

Mr Troendle and his management team will remain in charge and keep a minority stake in the business.

Medpace was advised by Jefferies and Fairmont Partners, while Cinven was advised by Barclays and Wells Fargo.

A person familiar with the transaction said the deal would generate a windfall for CCMP of three times the cash it invested in Medpace in 2011.

Health has been one of the hottest sectors for M&A this year, with $55.7bn of deals among global pharmaceuticals, medical and biotech companies up to the end of last week, compared with $14.2bn in the entire first quarter of 2013, according to Mergermarket.

Most of the activity has been in the US, including last week’s $25bn acquisition of New York-based Forest Laboratories by Actavis, one of the world’s biggest generic drugmakers.

Additional reporting by Anne-Sylvaine Chassany

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