Healthcare products company co-investment opinion

A large, institutional investor client sought Stout's expertise with respect to a transaction opinion. The opportunity involved the acquisition of a developer and manufacturer of innovative infection-prevention products sold to hospitals, outpatient clinics, and other primary-care healthcare facilities. The institutional investor was seeking an independent opinion regarding the price offered by the potential acquirer, a financial sponsor (whom the institutional investor would co-invest alongside of, at the same price and terms), and whether it was within or below the range of prices reasonably likely to be paid in such a transaction.

As part of our due diligence, we reviewed the principal terms of the transaction, the financial, accounting and tax risks, operational risks such as management and integration issues, and industry and market risks. We analyzed projected cash flows via a discounted cash flow approach as well as an evaluation of the trading multiples of guideline public companies and the multiples at which comparable companies had transacted in change-of-control M&A deals. In addition, Stout reviewed the acquirer’s deal model and performed a sensitivity analysis on the sponsor’s projected returns, including the expected internal rate of return and multiple of money for the investment.

Our analyses and due diligence provided our client with the information needed to confidently move forward with the co-investment – a decision that paid off nicely when the financial sponsor sold the business three years later for nearly $3 billion.

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