What Makes Beckman Attractive?
Analysts say that private equity groups are becoming increasingly interested in healthcare companies in part because President Obama’s Affordable Care Act is expected to increase demand for medicines.
Beckman Coulter is perceived to be the kind of cash-generating business that attracts private equity. Through the first nine months of 2010, the company had net income of $150 million on $2.7 billion in sales and as of September 30, 2010, had about $285 million in cash, despite its recent spate of troubles. Beckman remains an innovative company for medical and biomedical research instrumentation. For example, the company’s flow cytometric analysis products enable a vast array of cell-based research.
And while Wall Street has carped that Beckman Coulter failed to refresh its business with the latest in genomic-based diagnostics, the company’s spate of relatively recent collaborations and acquisitions suggest otherwise. In 2009, the company acquired Cogenics, the genomics division of Clinical Data, as well as the diagnostics systems business from Olympus, and then announced the creation of Beckman Coulter Genomics.
Earlier this month the company initiated a collaboration with Transgene for the development of a companion test to be used alongside its Phase III trials with anticancer candidate TG4010, an immunotherapy for non-small-cell lung cancer. Under terms of the deal, Beckman Coulter will develop a test measuring triple-positive (CD16+, CD56+, CD69+/CD45+ lymphocytes) activated NK cells. In January, 2010, the company announced a collaboration with the J. Craig Venter Institute on validation of the SPRIworks Fragment Library System I for use with the Illumina Genome Analyzer.
The question remains whether an innovative company like Beckman will survive either a private equity takeover or a strategic investor. Warren Buffett once criticized private equity firms as deal flippers uninterested in building long-term value. On the other hand, big companies that buy others for the strategic fit often dismantle them to save money and consolidate redundant operations but may lose innovation, expertise, and employee motivation through restructurings.
Leonard told GEN that no matter who does the buying, he doesn’t expect Beckman to be run much differently. “I know that private equity firms are known for taking out costs, but Beckman’s efforts to reduce its costs in areas like technical service are part of what bothered its customers in the first place, and the company has subsequently been adding costs in these areas to keep customers happy.
“I don’t think a shrewd private equity buyer would undo this work. Actually, a strategic acquirer might be able to take out more costs because it would have more redundancies in the various general and administrative functions, for example, C-level jobs, IT, finance, etc.”
Meanwhile, another rumor out and about in early January has it that interest in the company is on the decline, and all bets are off as the deadline for final bidding in early February approaches.