The CRO market favors a full service model and strategic partnerships
The U.S. CRO industry is currently valued at $15.1 billion and is expected to grow at an annualized rate of 11.0% to $25.5 billion during the five years to 2018.1 Revenue multiples are currently tracking at a median of 1.6x, while EBITDA multiples have a median of 12.8x. Since 2011, these have seen compound annual growth rates of 28% and 29%, respectively. Transaction multiples are tracking in a similar range, with median revenue multiples of 2.3x and median EBITDA multiples of 10.5x over the past 2 years.
Recent M&A activity in the CRO industry illustrate a trend towards a full service model. Top players have been acquiring small niche CROs to expand service offerings and form strategic partnerships with large pharmaceutical companies.
For example, in April 2013, PAREXEL International, a leading global CRO, acquired Heron Group, a life sciences consultancy firm for $24 million. PAREXEL announced shortly after that its acquisition of Heron Group will further its ability to offer their clients a full spectrum of services that aid in product development. Similarly, Eurofins Scientific, a world leader in bio analytical support, has been actively seeking service expansion. In September 2012, Eurofins acquired Pan Labs’ pharmacology unit to leverage its discovery capabilities and build a significant spectrum of new services that can be offered to clients.