A pair of private equity firms are acquiring contract research organization (CRO) Parexel for $8.5 billion, the latest in a series of deals involving companies in this sector of life sciences.
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EQT Private Equity and the private equity business of Goldman Sachs Asset Management announced the acquisition agreement Friday. The deal comes four years after Parexel was purchased by Pamplona Capital Management for about $5.5 billion, taking the then publicly traded CRO private.
Parexel, which has dual headquarters in Durham, North Carolina and Newton, Massachusetts, is a vendor to pharmaceutical and biotechnology companies, running clinical trials and providing other services that support the testing of experimental drugs and medical devices, the regulatory filings for these products, and their commercialization.
While the CRO sector has grown steadily, the industry stalled last year as the pandemic halted many clinical trials. In their announcement of the Parexel acquisition, EQT and Goldman cited Parexel’s role in the industry’s shift toward decentralized clinical trials, which employ various technologies that enable studies to be run remotely. The firms also noted Parexel’s role in improving clinical trial diversity as CROs aim to ensure that these studies better reflect the patient populations that will be served by a drug or device.
“We believe this investment will accelerate Parexel’s growth as it builds on the company’s global footprint, strong operational capabilities and expansive healthcare network,” Eric Liu, partner and global co-head of healthcare at EQT said in a prepared statement.
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The Parexel acquisition is not a complete surprise. Bloomberg reported in April that Pamplona was exploring a transaction for its CRO asset, either an IPO or a sale to another company. Bloomberg’s unnamed sources said that Parexel generates about $450 million in annual sales. Among the top 10 CROs, that figure puts the company in the middle of the pack.
The Bloomberg report came a week after Thermo Fisher Scientific announced it would pay $21 billion to acquire PPD, a publicly traded CRO that reported $4.7 billion in 2020 revenue. That deal followed the February announcement that two publicly traded CROs of comparable size, ICON and PRA Health Sciences, would merge in a $12 billion deal and operate under ICON’s name and management team. That transaction closed on Thursday.
Parexel was founded in 1982 and is led by Jamie McDonald, who prior to his role at the CRO was a senior advisor to EQT. Parexel’s headcount is approximately 17,000. It conducts clinical trials in more than 95 countries.
EQT, which says it has €67 billion in assets under management across 26 funds, has been an active investor in life sciences and health. Other healthcare industry investments include Aldevron, a supplier of the DNA plasmids used in cell and gene therapies; Recipharm, a contract development and manufacturing organization; and MHC Asia, a health benefits administrator operating in Southeast Asia. EQT made its Parexel investment from its EQT IX fund. The firm said that with the Parexel transaction, the fund will be between 55% and 60% invested.
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