Deal Profile: Thomas H. Lee Ramps Up inVentiv

Over the last 18 months, one of the most acquisitive private equity-backed companies has been inVentiv Health Inc., a provider of marketing, public relations and clinical services to pharmaceutical, biotechnology and medical device companies. Thomas H. Lee Partners took the company private in 2010 for about $1.1 billion.

The company has completed no less than eight acquisitions in the United States and Europe, three of which, when combined, cost more than what the Boston-based buyout shop paid for the parent (Campbell Alliance Group Inc., for $140 million; i3, for $400 million; and PharmaNet Development Group Inc., for $600 million). And inVentiv isn’t done: Its ongoing expansion strategy includes possible acquisitions in China, Japan, India and South America.

“We are focused on expanding inVentiv’s global footprint,” Todd Abbrecht, a managing director with Thomas H. Lee who leads the investment, told sister magazine Buyouts.

Thomas H. Lee’s rapid build-up highlights the interest private equity firms (including The Carlyle Group, Hellman & Friedman and Warburg Pincus, to name a few) have in companies, often called contract research organizations, or CROs, that provide outsourced clinical trials, marketing and other services for to pharmaceutical, biotech and medical device companies. In a 2011 report, Citigroup said the top-tier CRO market could grow more than 100 percent in the next five years. Meantime, inVentiv and other companies are rapidly consolidating to meet the growing desire to outsource these services to fewer companies.

The sector will continue to be fertile ground for private equity deals over the next few years. For one, the market remains ripe for consolidation, with hundreds, if not thousands, of smaller, niche CROs in the market specializing in various stages of product development. For CROs looking to expand and diversify, private equity firms can provide the needed capital to make acquisitions. Also attractive: CRO companies don’t require significant capital to operate and can carry a good amount of debt.

To be sure, the industry faces many headwinds as well. Large pharmaceutical companies are continually repositioning themselves and merging with other companies, which often results in dropped drug trials, changes in CRO vendors and other disruptions. And competition for deals is fierce. In one of the biggest deals of last year, for example, Carlyle and H&F ook Pharmaceutical Product Development Inc., a Wilmington, N.C.-based CRO, private for $3.9 billion, a purchase price that represented 10.8x the company’s projected 2011 EBITDA of $312 million. inVentiv reportedly looked into bidding on the company but ultimately did not.

To read the full profile, go here (Buyouts subs only).

Bernard Vaughan is a senior editor at Buyouts Magazine. Follow his tweets @BVaughanReuters. Follow Buyouts tweets @Buyouts.