The combined value of analytical science assets moving from Olympus and PerkinElmer into private equity hands.
Olympus has agreed to sell its scientific instrument subsidiary, Evident, to the private equity firm Bain Capital for $3.08 billion. The deal follows the news in mid-August that PerkinElmer is selling its name and general analytical assets to the private equity firm New Mountain Capital for $2.45 billion. In both cases, the companies are leaving the scientific instrument sector in favor of the faster-growing medical market.
Evident sells optical instruments, such as microscopes and X-ray fluorescence analyzers, as well as industrial endoscopes and related inspection equipment. Olympus says the deal is motivated by a desire to focus on its medical endoscopes and other therapeutic lines. Similarly, PerkinElmer CEO Prahlad Singh said in a press release that its divestment, which includes chromatography and mass spectrometry instruments, will make the remaining firm a “pure-play, high growth, high margin” life sciences and diagnostics company.
The deals are big but expected, and the valuations are fair, according to Vijay Kumar, an analyst who covers instrumentation at the investment banking consultancy Evercore. He says PerkinElmer has been methodically moving toward life sciences and away from analytical instruments. “I’m not overly surprised to see them pivot away from a business where they were not a top-two player and perhaps they were growing below their peer set, and focus their attention more on life sciences,” Kumar says.
Meanwhile, he says, Olympus’s scientific instrument business brought in less than 10% of the company’s revenues. The unit also had little customer overlap with its much larger medical device business, and divesting it lets Olympus simplify its sales and marketing apparatus.
While the sales make sense for PerkinElmer’s and Olympus’s growth plans, the acquisitions are also attractive to private equity because of their stable, positive cash flow, Kumar says.
That’s good news for the analytical scientists who are the business’s customers. “They will run the business in a lean fashion but certainly make investments in R&D,” Kumar says of the new owners. “From an end-customer perspective, if I’m worried about product quality or service, I wouldn’t expect that to fall off. It’s too tough to regain or rebuild the brand later.”