Bolt-ons will follow $14bn Pall deal, says M&A hungry Danaher

Last month, Danaher launched itself into the bioprocessing space by entering into a definitive merger agreement with Pall Corporation​, joining Thermo Fisher and Merck Millipore as the third major consolidator​ in the filtration, purification and separation space.

Speaking at the Deutsche Bank Global Industrials and Basic Materials Conference in Chicago, US this week, Danaher’s CFO Dan Comas hinted that more deals are on the horizon.

“We think there is substantial number of bolt-on and adjacency opportunities,” ​he told investors. “[Bioprocessing] is a $20bn market, and that doesn’t even factor in some very close adjacencies to the Pall business as well… in time this business will be even larger and stronger from both organic and inorganic opportunities.”​

There has been significant consolidation in the industry over the past few years: Thermo Fisher’s acquisition of Life Technologies​ and Germany’s Merck (Millipore) looking to close a $17bn deal​ for Sigma-Aldrich being the largest, but Pall too had been growing through acquisitions – ATMI​ and Medistad – before Danaher stepped in.

“[Pall] was trying, they got a few deals done,”​ Comas said, “but we’re pretty good at this; figuring out what are the right bolt-ons, the adjacent markets and then integrating those businesses.​

“I think there were some things that have traded on the life sciences side that would have been an interesting bolt on for Pall but we still see a pretty long runway,”​ he continued, adding there are a lot of “private and smaller public companies”​ that Danaher can add in time.

“If you look at Merck, Sartorius, Pall, and some of the industrial filtration [firms], there hasn’t been that many bolt-on adjacent-type acquisitions and clearly if you look at the market map there are a fair number of companies out there all over the world, both on the industrial and life science side, on the filtration and also close-adjacency.”​

Integration​

Pall’s biopharmaceutical business currently represents about a third of its total revenues, Comas said, totalling around $1bn a year in a market that’s growing at high single digits.

“It was not an inexpensive transaction by any metric, however we do believe it’s a unique asset with a business model we love: 75% of their revenues come in the aftermarket.”​

He also told stakeholders Pall would substantially better both the top and bottom-line at Danaher – which following the deal said it is spinning-out its industrial platform business – adding there are $300m of costs to come out of the business.

But when questioned Comas remained reserved in divulging where these cuts would come:

“We’ve done a lot of work at identifying costs and we won’t go into every functional and procurement area but we have a gameplan at how we will get to those $300m of cost savings,”​ he said, adding that from Danaher’s experience of M&A in other industries there is usually leverage when looking at logistics or materials.