Investors look to healthcare industry for M&A action

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Related tags: Private equity firms, Mergers and acquisitions

Strong buyer demand for growing and profitable businesses in the
personal care and supplements sectors means that sellers are
increasingly able to negotiate favourable terms, according to a
report that is due to be published this month by investment bank
Health Business Partners (HBP).

HBP's Merger & Acquisition Market Update Report identifies an upswing of merger and acquisition (M&A) activity in the nutrition and consumer healthcare industries, a significant influx of buyers and rising transaction multiples.

Moreover, the report highlights the strong demand from investors for established OTC/personal care businesses and potential large supply from divestitures by big pharma companies.

"Natural personal care companies have commanded good prices,"​ said the report, which is aimed at owners of companies looking at buying or selling, up and down the value chain - and it seems there is no shortage of interested parties.

Joint HBP managing director Mike Chase said that 40 executives took part in a conference call held on 8 February to discuss the highlights of the report, and a second call has been scheduled to take place on 8 March for the benefit of others who were unable to participate the first time around.

"The supplement segment of the nutritional products industry has not been this hot since 1998 - it is once again a good time to be a seller,"​ said Chase.

Mergers and acquisitions between dietary supplement companies have been few and far between over the past 18 months as the industry was hit by the general economic downturn.

According to Chase, a number of companies went into "hibernation"​ between 1999 and 2002, but have since returned to profitability, making them a prime target for strategic buyers and private equity firms seeking, at long last, to put the money they have raised to work.

The proliferation of buyers who have been biding their time means that company owners considering selling are in a strong position to secure attractive terms.

Chase's colleague Roy Bingham said: "Now more than ever, we see strong growth rewarded with higher transaction premiums. The influx of private equity firms offering attractive deal terms including recapitalizations has provided added competition to strategic buyers."

Readers wishing to receive more information about HPA, the report or the 8 March conference call can contact Mike Chase​.

Related topics: Business & Financial

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