Private equity group New Mountain Capital bought Avantor from Covidien for $280m (€250m) in 2010, before going on to merge it with laboratory and production business VWR in a $6.4bn deal in 2017.
VWR’s annual sales were around six times those of Avantor at the time of the acquisition, turning the buyer into a big player in the provision of biopharma products and services, and positioning it to pull off the second biggest IPO of the year.
Avantor arrived on public markets by persuading investors to buy 207m shares for $14 a piece, resulting in a gross IPO haul of $2.9 billion.
The money will support the redemption of certain existing shares and the paying down of debt, not investments in the business, but with the operation generating $200m in cash last year, Avantor has the means to expand.
With Avantor’s success to date resting partly on deals to provide the top 10 biopharma companies with products used in drug discovery, development and manufacturing, the industry is central to its plans for growth. Avantor also has access to biotech startups through its 20-year relationship with trade group the Biotechnology Innovation Organization (BIO).
Going forward, Avantor plans to grow by expanding its portfolio of process ingredients, serums, reagents, excipients and other products used in bioproduction.
In parallel, Avantor will take on more PhD-level employees with knowledge of biopharma workflows to support the expansion of its service business, while also expanding in China and other growth markets.
Avantor has seen demand for its products in China and other markets increase as regulators in those territories have applied more stringent quality and regulatory requirements, leading the company to identify expansion in the regions as a way to add to the $5.9bn in net sales it racked up last year.
However, Avantor also warned investors in its IPO filing that its global expansion strategy carries some risks, noting that it “requires considerable management attention and resources” and creates challenges associated with working across “multiple languages, cultures and customs [and] legal and regulatory systems.”
Other aspects of Avantor’s growth strategy also carry risks; notably, Avantor plans to continue growing through deals, in the belief that its global infrastructure and existing customer base enable it to make the most of acquired assets.
The history of acquisitions across the biopharma industry provides countless examples of how deals can fail to live up to such expectations.
Avantor’s IPO filing sketches out some of the risks, noting that challenges relating to integration, the maintenance of uniform standards and other issues may undermine its deal-driven growth strategy.
The filing describes the integration of VWR and NuSil, an earlier acquisition, as “ongoing,” adding that Avantor has “incurred significant new expenses to restructure and integrate” the assets. Avantor has spent $81.7m on VWR integration and planning to date.