With its latest acquisition, Instem is broadening its footprint once again and moving into an adjacent area as it plays its small part in consolidating the fragmented life sciences IT market – and seeking out profitable growth opportunities to make up for low organic growth (see here).
The provider of software to the global early stage development healthcare market has acquired Suffolk-based Perceptive Instruments for a total consideration of £1.3m (£1m in cash, plus a £0.3m earn-out based on performance). The acquisition is expected to be earnings enhancing in the first full year of ownership. Perceptive had revenue of £0.8m for the year to June 2013 (including £0.3m recurring) with EBITDA of £0.36m, but that will be enough to make a positive impact on Instem if it continues to perform. Instem’s latest trading update points to in-line performance, with signs of improved confidence in some areas of the business but deferrals in perpetual licences. Full year performance is reliant on the company closing anticipated contracts.
Perceptive operates in the image analysis and data management market and takes Instem into the in vitro R&D marketplace. The deal is similar to the Logos Technologies purchase in May 2013 (see here), in that represents a step into a new market area. The company has high hopes, quoting research forecasting CAGR of 15% in the in vitro toxicology testing market between 2010-15, on a market worth an estimated $1.3bn in 2010, and anticipated to reach $2.7bn in 2015.
This is another strategic purchase. Instem’s approach of moving into adjacent markets enables it to expand in a complementary way without struggling with product overlaps, and with a broader footprint it will be able to bid for larger, broader contracts. The Logos acquisition is producing results, the signs for Perceptive are promising.