The CRO market favors a full service model and strategic partnerships
The U.S. CRO industry is currently valued at $24 billion and is expected to grow to $33 billion by 2018.1
Revenue multiples are currently tracking at a median of 1.7x, while EBITDA multiples have a median of 12.9x. Since 2012, these have seen compound annual growth rates of 55% and 32%, respectively. Since the end of 2013, the CRO Index has consistently outperformed the S&P 500. Transaction multiples are tracking in a similar range, with median revenue multiples of 2.5x and median EBITDA multiples of 11.3x over the past 2 years.
Recent M&A activity in the CRO industry indicates a continuing trend toward a full service model. Top players have been acquiring small niche CROs to expand service offerings and form strategic partnerships with large pharmaceutical companies.
In the past two years, some notable expansion trends have been moves into technology platforms and widespread geographic expansion.
An example of a large player targeting technology is Quintiles’ acquisition of Patient Reminders in June 2013. This equipped Quintiles with a new service that allows clients or sponsors to reach patients directly with personalized messages and reminders of their study. The goal of this transaction was to increase subject compliance and retention in clinical trials.