Thursday, February 13, 2014

The Last Three Merck As (Distressed) Seller Deals Were All at 1.5 to 2.5 Times Trailing 12 Months' Sales Revenue. QED.


I've written at length on this, back in January 2014 -- so I'll not belabor each deal. But each [Deal 1: Akorn, Deal 2: Forest Labs, and Deal 3: Aspen] was a non-core asset -- and each sold (slightly distressed) -- for between 1.5 and 2.5 times sales. And so -- if Consumer Health is non-core, and going to require investment to reach world-class scale, 2.5 to 3.5 times the prior year's sales revenue is a pretty realistic guess. The higher multiple reflects the nice cash flow the businesses throw off.

Do the math.

And stop drinking banker-poured red Kool-Aid -- 20 times EBITDA? C'mon, man!

Here endeth the sermon.

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4 comments:

  1. AnonymousFebruary 13, 2014 at 8:42 PM

    Did no one see that earlier today the DEA published for comment their proposal that suvorexant be listed as schedule IV controlled substance? How is that not news anywhere, especially here?

    ReplyDelete
  2. CondorFebruary 13, 2014 at 9:43 PM

    Wow! You are right, Anon.!

    That IS news! Thank you!

    I was busy with my "other" gig. . . and off the grid, as to that.

    New post up in a few -- with a custom-tailored graphic!

    Thank YOU!

    Namaste

    ReplyDelete
  3. AnonymousFebruary 15, 2014 at 7:24 PM

    Condor,

    Does this article help you think any differently about the potential selling price?

    http://invezz.com/news/equities/8582-reckitt-benckiser-share-price-rallies-on-prospective-merck-deal

    ReplyDelete
    Replies
    1. CondorFebruary 15, 2014 at 7:56 PM

      Thanks Anon. --

      I see the quoted 5X sales ($8 to $10 billion) and the note that it would be "expensive but manageable" for the UK firm.

      That makes my point nicely. 5X sales is... Expensive!

      I bet that it sells at around 3.5X sales.

      Do stop back! Thanks!

      Namaste

      Delete