- Within our direct investments, we look for attractive sub sectors whose growth is underpinned by long-term trends.
- Avania is set to continue to benefit from strong growth in the global medical device CRO market, driven by growth in outsourcing of clinical trial activity by sponsors and an increasingly onerous regulatory environment.
- Together with our investment partner, we aim to grow the business through continued organic growth and a focus on bolt-on acquisitions, taking advantage of the company’s position as a market leader in a very fragmented market.
- Avania is the fifth investment of Unigestion Direct II.
In 2016, Kester Capital, a UK-based private equity firm, acquired Avania (formerly known as Factory CRO) alongside the founders. Through a series of bolt-on acquisitions, the company has developed into a global integrated full service Clinical Research Organisation (“CRO”) for medical devices, novel technology and combination (drug/device) products. In September 2020, Unigestion Direct II invested in Avania by providing liquidity to the original founders.
This case study provides an insight into our direct private equity investment strategy and approach. It illustrates the typical characteristics of companies in which we invest and how we aim to create value.
About Avania
Founded as Factory CRO in 1988 and rebranded in 2020, Avania is a full service Clinical Research Organisation (“CRO”) for medical devices, novel technology and combination products. Its core service offering spans regulatory and strategy consulting, reimbursement, clinical operations, data management and biostatistics, medical writing, medical services and quality services. The company has over 120 employees and is headquartered in the Netherlands (Bilthoven), with additional offices in the US (Boston and San Diego) and Australia (Melbourne and Sydney).
Why did Unigestion choose to invest in Avania?
Unigestion targets investments in resilient companies with superior value propositions, strong management teams and attractive financial metrics. A key criteria for evaluating a potential investment in a company is whether it fits one of our investment themes, as detailed in Figure 1. In this case, Avania met the criteria of our “Healthcare System Reengineered” theme. The company is the only pure-play medical device CRO of global scale.
The global medical device clinical research and development market is growing at c11% per year and is expected to reach USD 12.8bn by 2023. Growth is being driven by the trend for medical device manufacturers to outsource complex clinical trial activities and the rise in global regulatory and evidentiary requirements for commercialisation such as the new European Medical Device Regulation due to come into force in May 2021. Indeed, the market is at the same point of expansion that the pharmaceutical clinical research and development market was around 20 years ago.
While growing rapidly, the pure-play medical device outsourced services market remains heavily fragmented, with no player generating more than USD 50m in revenue. However, there has been an increase in M&A activity from Tier 1 pharmaceutical CRO players to acquire medical device expertise (e.g. in 2019, Covance acquired RCRI, and IQVIA acquired GCE Solutions).
Avania considers itself to be the leader in its niche, being the only pure-play medical device CRO with ISO certification, state-of-the-art big data infrastructure and truly global capability, ensuring clients no longer have to sacrifice medtech expertise for global reach.
Figure 1: Private Equity Themes, Drivers and Impacted Sectors
Source: Unigestion, October 2020.
Did the COVID-19 crisis impact the fundamentals of this transaction?
Our diligence period was undertaken during COVID-19 and we were able to monitor the company closely through the lockdown. The business continued to trade well through the crisis, with strong year-on-year growth in revenue and profitability due to the essential “mission critical” service that the company provides, as well as due to the medium-to-long term nature of its customer contracts. In addition, Avania benefitted to some extent from COVID-19-related business opportunities such as accelerated regulatory approvals for virus testing medical devices.
How do you plan to create value in this investment?
Avania is run by a highly experienced and committed board of directors and management team with a demonstrable track record in the sector. The company has consistently outperformed its peers and has an attractive financial profile. Furthermore, the customer base is a solid and diverse mix of blue chip medical device manufacturers, pharmaceutical manufacturers, biologics manufacturers and research and development companies, with no single client representing more than 5% of revenue.
Over the last few years, the Avania management team has successfully built a global medical device CRO in a market benefiting from significant tailwinds and attractive market dynamics.
We look forward to continuing this success story alongside Kester Capital.
We expect the company’s strong organic growth to continue, driven by anticipated market growth. In addition, through bolt-on acquisitions, the company will continue to expand its geographical reach and its service offering in selected areas. Management has already identified a number of targets in various countries.
Why did Unigestion choose to invest with Kester Capital?
Kester Capital is a UK based manager with whom the Unigestion team has interacted for a number of years. Kester Capital has relevant experience in the CRO and medical devices sector and was seeking an institutional investor with a global footprint and understanding of the sector to continue supporting Avania’s successful global consolidation efforts. With its global team and expert network, Unigestion was able to conduct an efficient and targeted due diligence programme across multiple geographies. Moreover, the close collaboration between Kester Capital and Unigestion throughout this process has resulted in a close and trusting relationship with a strong alignment for the future growth and ultimate success of Avania.
Important Information
Past performance is no guide to the future, the value of investments, and the income from them change frequently, may fall as well as rise, there is no guarantee that your initial investment will be returned. This document has been prepared for your information only and must not be distributed, published, reproduced or disclosed by recipients to any other person. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
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Investors shall conduct their own analysis of the risks (including any legal, regulatory, tax or other consequences) associated with an investment and should seek independent professional advice. Some of the investment strategies described or alluded to herein may be construed as high risk and not readily realisable investments, which may experience substantial and sudden losses including total loss of investment. These are not suitable for all types of investors.
To the extent that this report contains statements about the future, such statements are forward-looking and subject to a number of risks and uncertainties, including, but not limited to, the impact of competitive products, market acceptance risks and other risks. Actual results could differ materially from those in the forward-looking statements. As such, forward looking statements should not be relied upon for future returns. Targeted returns reflect subjective determinations by Unigestion based on a variety of factors, including, among others, internal modeling, investment strategy, prior performance of similar products (if any), volatility measures, risk tolerance and market conditions. Targeted returns are not intended to be actual performance and should not be relied upon as an indication of actual or future performance.
No separate verification has been made as to the accuracy or completeness of the information herein. Data and graphical information herein are for information only and may have been derived from third party sources. Unigestion takes reasonable steps to verify, but does not guarantee, the accuracy and completeness of information from third party sources. As a result, no representation or warranty, expressed or implied, is or will be made by Unigestion in this respect and no responsibility or liability is or will be accepted. All information provided here is subject to change without notice. It should only be considered current as of the date of publication without regard to the date on which you may access the information. Rates of exchange may cause the value of investments to go up or down. An investment with Unigestion, like all investments, contains risks, including total loss for the investor.
Unigestion Direct II (UDII) has been created as a SCS-SICAV-RAIF in Luxembourg and qualifies as an Alternative Investment Fund (AIF) within the meaning of the law dated 12 July 2013 on Alternative Investment Fund Managers implementing the Directive 2011/61/EU (AIFMD). As a result, units of this vehicle may be offered only to professional investors and may not be distributed on a public basis in or from any country where such distribution would be prohibited by law. This document contains a preliminary summary of the purpose and principal business terms of an investment in UDII. This summary does not purport to be complete and is qualified in its entirety by reference to the more detailed discussion to take place with the AIF. UDII has the ability in its sole discretion to change the strategies described herein. Before making a decision to invest in UDII, you are advised to consult with your tax, legal and financial advisors.
Additional Information for US Investors
The performance figures are based on estimated fees and expenses as well as on the underlying strategy’s estimated performances given by fund managers, administrators, custodians and third party sources at a given date. Where performance is reflected gross of fees, potential investors should be aware that the inclusion of fees, costs and charges will reduce the overall value of performance. Unless otherwise stated, the performance data source are Unigestion, Bloomberg and Compustat.
This information is provided to you solely to give you background information relating to Unigestion, certain strategies it implements and currently offers. Before making an investment decision with respect to the strategy discussed herein, potential investors are advised to consult with their tax, legal, ERISA and financial advisors. Note that not all strategies may be available or suitable for investment by U.S. investors.
This document may contain forward-looking statements, including observations about markets and industry and regulatory trends as of the original date of this document. Forward-looking statements may be identified by, among other things, the use of words such as “expects,” “anticipates,” “believes,” or “estimates,” or the negatives of these terms, and similar expressions. Forward-looking statements reflect Unigestion’s views as of such date with respect to possible future events. Actual results could differ materially from those in the forward-looking statements as a result of factors beyond a strategy’s or Unigestion’s control. Readers are cautioned not to place undue reliance on such statements. No party has an obligation to update any of the forward-looking statements in this document
Return targets or objectives, if any, are used for measurement or comparison purposes and only as a guideline for prospective investors to evaluate a particular investment program’s investment strategies and accompanying information. Performance may fluctuate, especially over short periods. Targeted returns should be evaluated over the time period indicated and not over shorter periods.
The past performance of Unigestion, its principals, shareholders, or employees is not indicative of future returns.
Except where otherwise specifically noted, the information contained herein, including performance data and assets under management, relates to the entire affiliated group of Unigestion entities over time including that of Unigestion UK. Such information is intended to provide the reader with background regarding the services, investment strategies and personnel of the Unigestion entities. No guarantee is made that all or any of the individuals involved in generating the performance on behalf the other Unigestion entities will be involved in managing any client account on behalf of Unigestion U.K. More specific information regarding Unigestion UK is set forth herein where indicated and is available on request.
There is no guarantee that Unigestion will be successful in achieving any investment objectives. An investment strategy contains risks, including the risk of complete loss.
The risk management practices and methods described herein are for illustrative purposes only and are subject to modification.
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Document issued October 2020.
