Right on schedule, PerkinElmer has successfully divested its applied science, food, and enterprise services units to American private equity firm New Mountain Capital, and merged the remaining life sciences and diagnostics entities into a standalone business.
“Today marks the culmination of the hard work and dedication from PerkinElmer teams around the world to ensure that both new companies are in a position to succeed on day one,” said Prahlad Singh, president, and CEO of the PerkinElmer Life Sciences and Diagnostics company. “As we look ahead, our new Life Sciences and Diagnostics organisation has an immense opportunity to continue to lead with science to redefine human health.”
Fleshing Out the Spin-Off
Under the terms and conditions of the spin-off drafted in August 2022, New Mountain Capital—a private equity firm—offered USD 2.3B in cash as part of its effort to acquire the trio of PerkinElmer businesses, according to Yahoo Finance.
According to PerkinElmer’s annual earnings report, in 2022, the divested equities generated just under $1.3B ROI and constituted one-third of the company’s total workforce. Altogether, the firm represented roughly 5% year-on-year/YOY growth last year.
On the other hand, PerkinElmer’s core businesses generated over $3.3B in revenue in 2022—a slip of around 13% from $3.8B in 2021. The plunge in revenue has an obvious reason: as COVID-19 responses are winding down, the demand for diagnostics worldwide has plummeted.
However, the company expects the completed spin-off to boost its revenue by 10% each year.
PerkinElmer underscored this spin-off as part of its long-term effort to slim down its focus solely on its two core businesses—life sciences and diagnostics research.
The company expects the influx of cash from the transaction to help it evolve into a high-margin, high-growth company with a unique scale.
“Today’s announcement is a pivotal step in the significant portfolio transformation we have been executing over the last several years,” stated Singh while announcing the divestment last August, and added that the funding will help support “accelerated investment into attractive end markets across science and disease.”
The entities taken over by New Mountain Capital will work on producing novel scientific breakthroughs. The plan is to retain PerkinElmer’s name with the applied, food, and enterprise services businesses until a new appellation, logo, and stock ticker is finalised. PerkinElmer announced at the execution of the sell-off that the newly formed business expects to receive a new moniker by the second quarter of the year, which is yet to be approved by the shareholders.
A Successful Divestiture Needs an Effort in Coordination
The strategic process of selling an asset or a business unit, a divestment is a highly intricate transaction in the M&A industry that needs a coordinated effort to be successful.
For future-focus companies looking to ensure successful spin-off or carve-out of their business entities, leveraging a high-end M&A and IT service provider like Fission Consulting is a sensible business investment.
Industry-leading IT transformation services help private equity firms and enterprise-level clients navigate complex transactions while ensuring minimal business disruption.
Regardless of the reason behind the divestment, PerkinElmer expects this transaction project to act as a step-change in helping the company accelerate diagnostic and life sciences research.