TPG Capital Takes Aim at $4bn Payday with Novotech Exit

Dec 4, 2023 | News

TPG Capital is shaping up for a big start to the new year, after 2023 saw it sweep death care services business InvoCare, off the ASX-boards, and explore an exit of pets & vets business Greencross. 

Now the private equity giant is bringing Novotech, a clinical research organisation, to market, mandating long-time advisors Goldman Sachs to explore options for the business. It was valued at $3bn in the private markets early last year.

Sources said Goldman Sachs has been instructed to explore both an initial public offering and a sale of the business. However, given the derating in listed peers’ trading multiples, a trade sale to an offshore party would be the most likely outcome.

Readers would recall Novotech had Goldman Sachs and UBS arrange meetings with Asian equities investors in late 2021 in hopes of raising up to $1bn for its IPO.

At the time, Goldman Sachs’ analysts thought the business should be worth between $3bn to $4.2bn or 57-times to 76-times forecast 2022 profit, on a price-to-earnings basis. Listed comparables are now trading at about 25-times.

 Despite a six-year investment period and derating in listed peers, Novotech is one of TPG’s marquee investments in Australia, and expected to spell a big payday for its limited partners and dealmakers.

The company was founded in 1996 in Sydney and sold a 50 per cent stake to Clark Perkins’ Mercury Capital in 2013. Mercury exited four years later, selling to TPG for more than $300m. At the time Novotech had already expanded operations to more than 10 countries across the Asia Pacific and was expecting to make $30m EBITDA in the 2018 financial year.

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TPG dealmaker Joel Thickins, who has spearheaded the investment, merged Novotech with the firm’s other contract research business, Singapore-based PPC Group, to form Novotech Health Holdings in late 2020. It then hired Lazard to quietly sell down a minority stake in the combined business.

The 2021 IPO pitch forecast $228m sales in 2021, increasing to $408m in 2023, while net profit was tipped to go from $25m to $74m in the same period.

While the mooted IPO was delayed, TPG focused on bulking up Novotech via strategic bolt-on acquisitions. Last year, Novotech waved its flag on two new continents: in the US via an acquisition of South Carolina-based clinical development player NCGS, and then in Europe by purchasing Poland-based EastHORN Clinical Services.

TPG owns a controlling stake in Novotech. Other investors include Singapore’s sovereign wealth fund GIC, America’s Kaiser Foundation Hospitals and Sequoia Capital China Growth, which came in via a pre-IPO round.

Source: AFR

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