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Dealwatch: Big-ticket life sciences activity picks up again as overseas investors buy into the UK

The broader life sciences sector saw a spate of deal activity in recent weeks, with two acquisitions over the billion-dollar mark and several more in the hundreds of millions.

The highest-value transaction came on 28 August, when US-based life sciences company Danaher announced its agreement to purchase Cambridge-based protein research tools supplier Abcam in a deal valued at $5.7bn.

Latham & Watkins advised Abcam, with a team led by London corporate partners Robbie McLaren, Richard Butterwick, Anna Ngo, and Jennifer Gascoyne. Scott Shean in Orange County and Leah Sauter in New York advised on US corporate matters, with Sarah Gadd in London and Nikhil Kimar in Washington DC on employment and benefits, and Héctor Armengod in Brussels and Mandy Reeves in Washington DC on antitrust and regulatory.

Danaher was represented by a transatlantic team from Skadden, including corporate partners Thomas Greenberg in New York and Lorenzo Corte in London, IP and technology partner Bruce Goldner in New York, and tax partners Gavin White and Alex Jupp, in New York and London, respectively.

In addition, a Davis Polk team including New York-based corporate partner Phillip Mills provided advice to Lazard and Morgan Stanley, who acted as financial advisers on the transaction.

Danaher’s offer of $24 per share comes at a premium of more than 25% to Abcam’s closing stock price before reports in mid-June that Abcam was seeking suitors. It comes at the end of what Abcam chair Peter Allen referred to in a statement as ‘a rigorous process’ – a review of strategic alternatives.

Danaher cut its annual sales forecast twice this year, in April and July. The acquisition offers it the chance to bolster its performance with a wider offering, and its shares rose by more than 2% of the back of the announcement. Abcam’s fell 4% on the day of the deal’s announcement, but have since rebounded.

The transaction has been unanimously approved and recommended by Abcam’s board and unanimously approved by Danaher’s, subject to shareholder approval. The deal is expected to close in mid-2024.

In another billion-dollar-plus deal that saw an international acquirer buy a UK company, UAE healthcare platform PureHealth bought Circle Health from US-based Centene for $1.2bn. The acquisition is part of an expansion strategy for PureHealth, which is majority-owned by a consortium including Abu Dhabi investment fund ADQ and International Holding Company (IHC), both chaired by UAE national security adviser Sheikh Tahnoun bin Zayed Al Nahyan.

London corporate partner Braeden Donnelly led the Ashurst team advising PureHealth, with support from Dubai-based relationship partner Simon Rahimzada, as well as Hong Kong corporate partners Michel Sheng and Joshua Cole, and competition partner Neil Cunninghame, who works in London and Dublin. Additional London team members included tax partner Simon Swann, regulatory partner Bradley Rice, data protection partner Rhiannon Webster, IP partner Sunny Kumar, planning access and environment support partner Eleanor Reeves, real estate partner Henry Moss, and global loans partner Briony Holcolmbe.

Legal Business understands that Dickson Minto advised Centene, with a team led by Edinburgh-based partner John Pentland. Dickson Minto did not respond to requests for comment.

‘We’ve got a lot of healthcare deals on the books at the moment’, Ashurst’s Donnelly told Legal Business. ‘Part of that is because, frankly, even in a recession, people are still going to need healthcare, and there’s still going to need to be state support for that.’

Donnelly reported a busy practice in the mid-market, despite muted activity at the top end. ‘That’s been driven by a lot of things. The finance markets are quite choppy, not to mention expensive. And there’s a fair bit of uncertainty over what’s going to happen on the macro level in the next twelve to eighteen months. In the mid-market, there’s less pressure on the financing, because you’ve got a greater potential to get a higher multiple. You can still achieve returns for investors despite expensive debt markets.

‘This transaction is a positive signal. It shows confidence in the UK health sector – that this is a place that you can invest your money, and it’s going to be safe.’

Activity continued in the life sciences sector with the 4 September announcement that European private equity firm Permira has agreed to buy Surrey-based biopharmaceuticals service company Ergomed, in a deal valued at £703m.

Freshfields advised Permira and the board of directors of Eden AcquisitionCo Limited, a newly formed company owned by funds advised by Permira. The Freshfields team was led by London corporate partners Kate Cooper and Piers Prichard Jones and global private capital co-head Charles Hayes. The firm also provided support in a financial advisory capacity, led by finance partner Aled Batey, also in London.

Ergomed, meanwhile, was advised by a London corporate team from Covington & Burling led by Ben Land-Maycock and James Gubbins, with Paul Claydon providing specialist takeover code advice.

A team from Allen & Overy advised the lenders, led by London-based leveraged finance partner Hannah Gates. Legal Business also understands that Simpson Thacher, which did not respond to requests for comment, acted as funds formation counsel. Rothschild & Co served as financial adviser to Permira, advised by an Ashurst team led by London corporate partners Tom Mercer and Harry Thimont, with a team that also included London banking partner Tim Rennie.

The Ergomed acquisition follows not only the acquisitions of Abcam and Circle Health, but EQT’s £4.5bn purchase of Dechra in June, and Archimed’s purchase of drug development technology services firm Instem for £203m, announced on 30 August.

Latham was once again involved on the latter deal, with a team led by London corporate partners Farah O’Brien and Douglas Abernethy advising Archimed. Instem was advised by a team from Squire Patton Boggs including global corporate partners Giles Chesher and Louise Barber in Manchester, Mark Simpson in Leeds, and chair of the firm’s international trade practice George Grammas, who splits his time between London and Washington DC.

Away from the life sciences sector, Canada-based Fairfax Financial Holdings acquired a ‘significant stake’ in Meadow Foods, a UK-based ingredients company focusing on dairy, confectionery, and plant-based foods.

Private equity firm Exponent, which partnered with Meadow’s founding Chantler family to acquire the business in 2018, will retain a stake, as will the Chantlers.

A&O advised Exponent and the shareholders of Meadow on the transaction, with a team led by London private equity partners Chris Sabine and Peter Banks. Fairfax, meanwhile, was advised by a London team from Shearman & Sterling including partners Nick Withers, Simon Burrows, Simon Letherman, and Matthew Readings. Legal Business also understands that Macfarlanes played a role in the transaction, though the firm declined to comment.

‘Buyouts in particular have been relatively quiet’, commented A&O’s Banks. ‘So we’re seeing more partial sales, where a business might keep its existing financing. We’re also seeing more hybrid transactions, providing equity funding through preferred shares or convertibles. Funds have to be quite creative to fill the gap.’

Banks expects to see more of this sort of transaction towards the end of this year and into the next. ‘There’s a significant backlog of exits which are likely to come to market over the next six months’, he said. ‘Part of this is that closed-end funds simply have an increasingly high number of assets that need to be sold. Another part is that many limited partners in PE funds will have experienced the denominator effect. Where a drop in the value of their investments in the public markets has resulted in their percentage allocation to private equity increasing, sometimes close to their target allocation. So these limited partners are pressuring general partners to return some of their capital.

‘The big question is, when does that set of transactions restart? The view of some funds and advisers is that deal-flow will only really kick off in Q1 of next year, while others are saying it’ll be earlier, in Q4 of this year.’

Banks concluded: ‘While this transaction was more opportunistic, I do think that as deal-flow starts to return you will see more transactions of this nature. It’s a bit harder to predict which businesses are susceptible to such approaches. But the increase in opportunistic activity more generally is easier to predict. Everyone seems to be waiting for the starting gun.’

Urbaser, meanwhile, agreed to sell its Nordic business to Cube Infrastructure Managers, in a transaction with an estimated enterprise value of €390m. Urbaser was advised by Latham, which previously represented Platinum Equity in its 2021 acquisition of Urbaser. London corporate partners Tom Evans and Katie Peek led the team, which also included corporate partner Ignacio Pallarés, antitrust partner José María Jiménez-Laiglesia, and tax partner Jordi Domínguez in Madrid, as well as IP, IT, and data partner Christian McDermott and tax partner Karl Mah in London.

The transaction is expected to close in Q4 of this year.