With Phenomenex, Danaher Has an Attractive Consumables Asset

On October 12, 2016, Danaher (DHR) announced that it had signed a definitive agreement to acquire Phenomenex, a privately held manufacturer of separation and purification consumables. The transaction is expected to close by the end of the year. Details of the financials related to the deal were not revealed. However, the Evercore analyst Ross Muken estimates that the firm could have paid anything north of $700 million on the deal. In his note to his clients, he said that with revenues of $200 million, the deal likely has an enterprise value to revenue multiple of ~3.5x.

The details of the financials related to the deal were not revealed. However, Evercore analyst Ross Muken estimates that the firm could have paid anything north of $700 million on the deal. In his note to his clients, he said that with revenues of $200 million, the deal likely has an enterprise-value-to-revenue multiple of ~3.5x.

Phenomenex is an organization with over 700 employees and provides support in 92 countries. The company’s 7,000 products support applications in industries such as food processing (PBJ), clinical research, toxicology, and petrochemicals (XOP). The company is a 100% consumables business and has a gross margin of ~70%. Its operating margins are in the mid-20s. Danaher expects to earn a double-digit return on invested capital on the acquisition in about five years.

On the acquisition, Executive Vice President Dan Daniel offered the following comments: “Phenomenex is a strong business characterized by high growth rates and margins and excellent growth prospects driven by increasing analytical testing needs in the health, research, and environmental segments. The Danaher Business System (DBS) has a strong track record of helping businesses rapidly scale operations and create long-term customer value. We look forward to supporting the Phenomenex team in leveraging DBS tools for growth and welcoming them to our Life Sciences team.”