UDG on €550m acquisition trail as it sizes up likely targets
Irish healthcare firm UDG has about €550m to fuel acquisitions and is targeting deals worth around €100m each, according to chief executive Brendan McAtamney.
He said that there's a good pipeline of potential targets, and that even in the past week he met with five companies from both the United States and Europe that presented takeover possibilities.
Each would have been "close enough" to the €100m size, Mr McAtamney said.
But he insisted that the FTSE-250 company, whose activities include sales, marketing and medical communications outsourcing, and pharmaceutical packaging, would apply rigorous criteria in selecting targets.
"We try to be reasonably disciplined. It has to be a strategic fit and that capability that we bring in is really important," he told the Irish Independent.
"The people cultural fit is really important, and then clearly a financial return. We have a 15pc return on capital employed target. So we try to use those three filters in terms of how we go after assets."
UDG Healthcare - which has a market capitalisation of almost £1.5bn (€2bn) - has between €130m and €150m in cash to plough into acquisitions, which when leveraged with debt can give it up to €550m in firepower, said the ceo.
"It should allow us to do up to four or five chunky deals," he said.
Mr McAtamney was speaking as UDG reported a 15pc rise in its first-half operating profits to €48.4m, with revenue climbing 6pc to €472.4m.
Its largest division - Ashfield - provides outsourced services from sales, marketing and patient engagement to drug companies. It performed well, as did UDG's Sharp packaging unit, propelled by its US operations. UDG completed the €407m sale of its drug distribution business earlier this year.
Mr McAtamney said the group is likely to target acquisition activity on the US.
"The preference would be the States. We clearly need to get bigger in the States. It's a priority market for us." He said it's like that the US will be the biggest part of UDG's business within the next 24 months.
A major new packaging facility in Pennsylvania is due to come on stream in the second half of this year.
UDG would hope to complete at least one of its €100m-plus acquisitions within the next 12 months, according to Mr McAtamney.
"I sincerely hope so," he said. "M&A strategy is a mix of intent and opportunities at the right time. There are assets out there, but it's about applying financial rigour and making sure it's a growth story."
UDG also completed a bolt-on acquisition of a UK PR firm during the first-half. It paid an initial £10.1m to buy Pegasus PR, with a potential earn out of £6.7m.
The company's joint venture in Japan has also begun expanding. In 2014, UDG formalised its partnership with CIMC to target contract sales in the country.
Mr McAtamney said the venture has just begun expanding its offer there to include a call centre and nurses, and will introduce healthcare communications to Japan over the next 12 months or so.
"It's a good international footprint to have," he said. "Our pharma clients like the fact that we're in major markets."
UDG Healthcare's pharmaceutical clients include drug firms such as Pfizer and Astra Zeneca. Shares in UDG have risen about 10pc over the past year.