Genstar preempts Advarra process in ~$1.3 bln deal

  • Advarra formed via ’17 merger of Linden’s Chesapeake IRB, Northlane’s Schulman IRB
  • EV-to-Ebitda multiple equates to ~18x
  • IOIs submitted in late May

Preempting the highly anticipated sales process for PE-backed Advarra, Genstar Capital agreed in June to buy the provider of compliance-related services for clinical research, according to sources familiar with the matter.

The pending acquisition values the Columbia, Maryland, company at about $1.3 billion and represents an 18x multiple of Ebitda, the sources said.

In connection with the transaction, majority investor Linden Capital through Fund IV intends to reinvest alongside Genstar, the sources said. Northlane Capital, based in Bethesda, Maryland, will exit its equity interest in full.

The agreement marks the conclusion of a Jefferies– and Houlihan Lokey-run sales process, with initial bids for the company submitted only about two weeks earlier, Buyouts reported.

Multiple parties tried to preempt what sources characterized as a heated sales process that fielded interest from a broad set of bidders in its early stages.

Advarra was created in November 2017 through the marriage of Linden’s Chesapeake IRB and Northlane’s Schulman IRB. The firms invested in the companies in December 2015 and December 2014, respectively.

Linden, which initially invested via its third fund, expects to post an 8x return on the sale, one of the sources said.

Advarra provides independent institutional review board (IRB), institutional bio-safety committee and research quality and compliance consulting services in North America. The company serves more than 3,000 pharmaceutical, biotech, medical-device and contract-research companies, as well as universities, academic medical centers and hospital systems.

Advarra in March acquired Seattle’s Quorum, bulking up its IRB services while also inheriting Quorum’s Kinetiq technology-consulting division.

Longtime industry executive Pat Donnelly holds the CEO post at Advarra. Donnelly most recently led Aptiv Solutions as chairman and CEO through its May 2014 sale to ICON.

Other notable players in the IRB industry include Arsenal Capital’s WIRB-Copernicus Group (WCG).

San Francisco’s Genstar is an experienced investor in the broader pharma services universe. For example, the middle-market firm in September 2018 formed CRF Bracket, a global e-clinical services provider, after merging existing portfolio company Bracket Global with Vitruvian PartnersCRF Health.

Genstar previously backed ERT, ultimately selling the pharma-services company to Nordic Capital in a 2016 deal that sources said fetched roughly $1.8 billion. Genstar reaped about an 8x return on the sale, Buyouts reported.

Representatives of Genstar, Linden, Northlane, Jefferies and Houlihan declined comment, while those with Advarra couldn’t immediately be reached.

Action Item: See Genstar’s latest Form ADV: