IMS is buyout bait?

Posted Oct 20th 2009 2:40PM by Tom Taulli
Filed under: Private Equity

Activity continues to buzz in the private equity world. For example, according to the Wall Street Journal (subscription required), it appears that IMS (NYSE: RX) is in advanced talks to take the company private. As a result, the shares of the company soared 22% in Monday's trading.

No doubt, a deal could fall apart. But, the fact remains that IMS has definitely attracted interest. Some of the suitors include: TPG, Silver Lake, and BC Partners. The deal could be worth as much as $3.5 billion.

IMS got its start in the mid 1950s when the founders -- Bill Frohlich (an advertising executive) and David Dubow -- saw an opportunity to build a unique information company for the pharma industry. The timing was perfect as the company quickly grew.

Now, IMS tracks more than 70% of the world's pharma sales, processing billions of transactions each year. For the first half of this year, the company has generated $1.05 billion revenues, with cash flows of $250 million. More than a majority of the revenues are on a subscription basis (with high renewal rates).

This fairly stable business model is certainly an attraction to private equity operators. This continues to be the case despite the recession and consolidation in the pharma industry.

Besides, as a private company, there will be an opportunity for IMS to restructure operations, which will be needed as health care undergoes significant changes because of governmental actions. That is, the company plans to increase its platform into foreign markets as well as increase its consulting capabilities.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: IMS, inthenews, rx