Life Sciences Tools & Diagnostics Industry Update Q1 2023

M&A volumes continue to be down following an extraordinary year in 2021, with a slow start in across virtually all sectors. While the expectation gap in valuation between buyers and sellers has made deals more difficult to close, underlying drivers remain strong for both strategic and private equity players.

The tools and diagnostics sector is well-positioned to tackle challenging markets – After the normalization of Covid-19 related revenues, companies are focusing once again on the traditional parts of their businesses, including bioprocessing, genetic analysis, liquid biopsy, spatial biology, and proteomics. On the diagnostics front, growth has been propelled by the need to fulfill expectations of faster speed, better accuracy, and convenience. The research tools players continue to benefit from the large levels of funding both from the U.S. government (including from initiatives like the Cancer Moonshot Mission) as well as from the broader capital markets.

M&A remains a priority for strategic players in the tool and diagnostics sector, with many management teams indicating that M&A will be necessary to achieve growth goals. Abundant cash balances should continue to allow the large and mid cap group of LSTDx companies to easily execute transactions amid a tougher financing market. Notably, Bruker made a pair of acquisitions to start off 2023, including Biognosys, which produces proteomics solutions for R&D and clinical trials.

New modalities including cell and gene therapies continue to drive M&A. Notable transactions include Waters Corporation acquiring Wyatt Technology for $1.4bn and Bio-Techne acquiring a 20% stake in Wilson Wolf Manufacturing. For both companies, these transactions provide exposure to the attractive large molecule end market.

Private equity firms have played an increasing role in the sector, accounting for 34.5% of the total deals YTD. In the last year, PE firms have completed numerous platform acquisitions, including via large corporate divestitures. Smaller add-on deals include Vector Laboratories’ (Thompson Street Capital) acquisition of Click Chemistry Tools and Fluoroprobes, and Calibre Scientific’s (StoneCalibre) acquisition of Alphascience. With substantial dry powder and strong interest in the sector, we anticipate that PE investment in the sector will continue to be robust.