An upside to Brexit for the - consolidating TIC market - Oaklins
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An upside to Brexit for the
consolidating TIC market
SPOT ON | TESTING INSPECTION & CERTIFICATION | Q1 2019
WHAT'S BEEN HAPPENING AND WHAT'S NEXT
“Brexit could have a large
The global M&A market for testing, We also still see an ongoing interest
inspection and certification (TIC) of private equity in the market. Strong impact on international
companies continues to be booming, and resilient industry fundamentals— TIC activities. It might be
thanks to strong fundamental growth including relatively high margins possible that UK certificates
drivers such as globalization, stricter combined with relatively low capital
regulations and an increased focus on cannot be placed in the EU
expenditures, and significant revenue
safety and quality control.
visibility driven by an ongoing increase market, and the other way
Consolidation is still one of the key in regulation—make this a popular around, unless re-tested or
drivers in the global TIC market, sector for financial investors. The wide re-certified.This could mean a
mainly driven by the top 10 largest availability of low-cost and flexible debt
sharp increase of TIC activities
TIC players but also by mid-sized further drives the overall M&A market.
companies. Over the last few related to trade between the
years, Eurofins has been one of the Another hot topic is the ongoing EU and the UK.”
largest consolidators in the industry, discussion about Brexit, which could
completing 50 transactions in 2018. have a large impact on international ARJEN KOSTELIJK
However, in a press release dated TIC activities. Negotiations on the OAKLINS TIC SPECIALIST
6 March 2019, Eurofins stated that, for conditions of Brexit are well underway. AMSTERDAM, THE NETHERLANDS
the coming period, the company will Whether or not arrangement can be
increasingly focus on the integration agreed for Notified Bodies and their
of the many add-on acquisitions it has customers is yet unclear. In the event
completed and related operational of a so-called hard Brexit, or the
performance optimization. After an absence of a transition or full UK-EU
exceptional level of over US$800m treaty, it might be possible that UK and
in revenues added in 2017 and 2018, EU Notified Bodies’ certificates will not
Eurofins intends to be very selective be mutually recognized or deemed
and will focus on deleveraging. valid. Products inspected, tested or
As such, we expect to see a lower certified by a UK Notified Body cannot
number of Eurofins transactions in the be placed in the EU market unless
coming months, which could provide re-tested/re-certified by an EU Notified
room for other consolidators. Body. This would mean a sharp
increase in TIC activities related to
trade between the EU and the UK.
Developments
For the TIC Q1 2019 newsletter, we have screened the last two quarters (October 2018–March 2019)
for TIC-related transactions.
We have divided 15 notable transactions into three different groups:
1. FOOD AND ENVIRONMENTAL
ͽͽ In February 2019, Broodstock and intolerances, for an undisclosed nutritional and functional medicines,
Capital, a Norway-based private consideration for an undisclosed consideration. The
equity firm, acquired Åkerblå, a ͽͽ In December 2018, Normec Group, acquisition is in line with Metagenics
Norway-based provider of consulting a Netherlands-based company Belgium’s strategy of creating a
and certification services for the that provides testing, inspections, presence in all European countries
fish health, environment and certification and compliance services, ͽͽ In October 2018, Eurofins
technical operations industries, for and a portfolio company of US- Scientific, a listed Luxembourg-
an undisclosed consideration. With based private equity firm Summit based provider of analytical testing
the support of Broodstock Capital, Partners, acquired a 75% stake in services, acquired TestAmerica
Åkerblå will be able to strengthen its Servaco Food Control, a Belgium- Laboratories, a US-based provider
service offering and expand into new based laboratory that specializes in of environmental testing services,
markets, thereby accelerating overall nutritional analysis, for an undisclosed for a total consideration of US$175m
business growth consideration (approximately 0.8x 2018 revenue).
ͽͽ In December 2018, Pike Street ͽͽ In October 2018, Metagenics With this acquisition, Eurofins will
Capital, a US-based private equity Belgium, a Belgium-based enlarge its footprint and complement
firm, acquired an undisclosed majority manufacturer and distributor of food the service offering of Eurofins
stake in US BioTek Laboratories, supplements, acquired a 71% stake Scientific’s environmental testing
a US-based provider of testing in Bionutrics, a Belgium-based business in the US1
services for food-related allergies provider of laboratory services for
1
Closing of transaction is still pending.
OAKLINS – Spot On · Testing, Inspection and Certification · Q1 2019 2
Dev elo p m e n t s
2. BUILDING, INDUSTRIAL AND
PRODUCTS
ͽͽ In January 2019, Applus Services, a a US-based provider of technology- ͽͽ In October 2018, Caisse de Dépôt et
listed Spain-based testing, inspection based non-destructive testing Placement du Québec, a Canada-
and certification company, acquired solutions, acquired Onstream based investment firm, acquired a
Talon Test Laboratories, a US- Pipeline Inspection Services, a minority stake in Biogroup-LCD, a
based aerospace testing firm, for Canada-based provider of pipeline France-based network of medical
an undisclosed consideration. The inspection and data analytics laboratories, for a total consideration
deal strengthens Applus Services’ services, for a total consideration of US$206.9m. Biogroup-LCD is a
presence in the US aerospace sector, of US$143.3m (9.0x 2019E EBITDA). consolidator in the French medical
broadening both its network and its The acquisition will allow Mistras to laboratory market, with two related
product offering diversify its business and accelerate acquisitions in December 2018
ͽͽ In October 2018, Wärtsilä its growth in the midstream market ͽͽ In October 2018, Unilabs, a
Corporation, a listed Finland-based Switzerland-based diagnostics
manufacturer of power generation company engaged in the provision
and marine propulsion equipment, 3. HEALTHCARE of laboratory medicine and radiology
acquired Burriel Navarro, a services and a portfolio company of
Spain-based company providing ͽͽ In January 2019, Sonic Healthcare, Apax Partners, a UK-based private
underwater maintenance and a listed Australia-based company equity firm, acquired SFMTBIO,
inspection machinery services, for an engaged in providing laboratory and Laboratoire de Biologie Medicale
undisclosed consideration radiology services, acquired Aurora Polibio and Biopath Laboratories,
ͽͽ In January 2019, Premier Technical Diagnostics, a US-based provider of three France-based medical
Services, a UK-based company diagnostic, prognostic and therapeutic biology laboratory operators, for an
engaged in providing access and information and services, for a total undisclosed consideration
safety services, acquired Trinity consideration of US$540m (9.2x pro-
Fire and Security Systems, a UK- forma 2018 EBITDA). The transaction
based company engaged in testing, will help Sonic Healthcare to expand its
maintenance and installation of fire US business footprint and will further
and security systems, for a total extend Sonic Healthcare’s presence
consideration of US$20.3m (10.5x 2018 in anatomical pathology. With this
EBITDA). The acquisition will enhance acquisition, Sonic Healthcare benefits
Premier Technical Services’ existing from the consolidation of the North
fire solutions offering. In October American medical laboratory market
2018, Premier Technical Services ͽͽ In October 2018, Cobepa, a Belgium-
also acquired Guardian Electrical based private equity firm, acquired
Compliance, a UK-based electrical BioAgilytix Labs, a US-based
testing and compliance company, for a bioanalytical testing laboratory
total consideration of US$15.8m specializing in large molecule
ͽͽ In January 2019, Bureau Veritas, bioanalysis, for an estimated
a listed France-based company consideration of US$400m (40x 2017
engaged in providing conformity EBITDA)
assessment, compliance evaluation ͽͽ In October 2018, NeoGenomics,
and certification services to various a US-based clinical laboratory
industries, acquired Capital network engaged in cancer genetics
Energy, a France-based provider diagnostic testing, acquired Genoptix,
of consulting and support services a US-based company engaged in
for white certificate projects,2 for providing oncology diagnostics
an undisclosed consideration. The and informatics services, for a total
acquisition will enable Bureau consideration of US$138.7m. The
Veritas to expand its range of energy transaction allows NeoGenomics to
efficiency services for the building have a comprehensive oncology test
and industrial asset sector menu and reach across all distribution
ͽͽ In December 2018, Mistras Group, channels
2
In environmental policy, white certificates are documents certifying that a certain reduction of energy consumption has been attained.
OAKLINS – Spot On · Testing, Inspection and Certification · Q1 2019 3
Market multiples and
valuation trends
CURRENT TRADING MULTIPLES
25.9x
19.9x
15.0x 15.2x
14.0x 14.3x
13.3x 12.9x 13.3x
12.5x 12.4x 12.2x
11.3x 11.2x
10.2x 10.3x 10.3x 10.1x
9.5x
8.7x
2018E 2019E Median 2018E (13.1x) Median 2019E (11.8x)
HISTORICAL VALUATIONS (EV/EBITDA NTM)
14.0x
13.5x 2018e 2019e
ALS
13.0x 12.5 11.3
12.5x Services
Applus 9.5 8.7
12.0x 11.5x
Bureau Veritas 13.3 12.4 Median multiple
11.5x
CTI 25.9 19.9
11.0x
Eurofins
10.5x Scientific 12.9 11.2
Intertek
10.0x Group 15.0 14.0
9.5x
Laboratory Corporation of America Holdings 10.2 10.3
9.0x
Quest Diagnostics 10.3 10.1
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19
SGS 15.2 14.3
Sonic Healthcare 13.3 12.2
OAKLINS – Spot On · Testing, Inspection and Certification · Q1 2019 4
ALS
lus Services
reau Veritas
CTI
ns Scientific
ertek Group
ca Holdings
Diagnostics
SGS
Healthcare
A bou t O a k l i n s
Decades of experience behind
the success of these deals:
Oaklins is the world’s most OAKLINS TIC SPECIALIST & AUTHOR
experienced mid-market
M&A advisor, with 800
professionals globally and ARJEN KOSTELIJK
Partner
dedicated industry teams in
Amsterdam, The Netherlands
40 countries worldwide. We have T: +31 61397 9718
closed over 1,500 transactions in
the past five years.
Oaklins disclaimer
This report is provided for information purposes only. Oaklins and its member firms make no guarantee, representation or
warranty of any kind regarding the timeliness, accuracy or completeness of its content. This report is not intended to convey
investment advice or solicit investments of any kind whatsoever. No investment decisions should be taken based on the contents
and views expressed herein. Oaklins and its member firms shall not be responsible for any loss sustained by any person who
relies on this publication.
© 2019 Oaklins. All rights reserved.
Oaklins is the collective trade name of independent member firms affiliated with Oaklins International Inc.
For details
OAKLINS – of theOn
Spot nature of affiliation
· Testing, Inspectionplease refer to www.oaklins.com/legal.
and Certification · Q1 2019 5
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