Matchmaking And Integration In The New World Of Diagnostics M&A

Until recently, in vitro diagnostics were priced nearly at commodity levels and were relegated to the relative backwaters of the life science universe. That’s changed, however, with the advent of molecular diagnostics tests that deliver more meaningful clinical value at correspondingly higher price points. As the value proposition has improved, the assemblage of companies vying for promising molecular diagnostics assets has changed as well. Seeking to capitalize on the potential of molecular diagnostics, nontraditional buyers have begun to enter into the sector, competing with traditional clinical diagnostics and diversified lab players such as Beckman Coulter Inc. (now a division of Danaher Corp.[See Deal]), Quest Diagnostics Inc., and Laboratory Corp. of America Holdings. Deals by nontraditional buyers, which we define here as companies deriving less than 50% of revenue from diagnostics, have grown from 33% of molecular diagnostics M&A deals consummated between 2007-2008 to 63% of molecular diagnostics M&A activity between 2011-2012. (See Exhibit 1.) Due to their outsized role in the evolving molecular diagnostics M&A landscape, understanding the unique dynamics of these acquisitions as well as the form and structure of post-acquisition integration has consequences for all molecular diagnostics players as they predict the future makeup of the market and their position within it.

Exhibit 1