Agilent expresses appetite to strike bigger M&A deals

In its fiscal 2019, Agilent spent around $1.4bn (€1.3bn) on takeovers, snapping up BioTek​ and ACEA BioSciences​ to expand its cell analysis capabilities. At close to $1.2bn, BioTek was by far the bigger of the two takeovers, and the largest Agilent has struck in recent years, but still came in just over the company’s historical $1bn ceiling on acquisitions.

On a recent fourth quarter results conference call, an analyst asked Agilent CEO Mike McMullen if the $1bn ceiling is still place. In response, McMullen said that old rule no longer applies.

McMullen said, “We’re increasingly confident on our ability to take on larger-scale acquisitions and deliver on value creation and synergies. I would not put a ceiling like that on our appetite for deals​.”

The lack of a fixed ceiling on the size of takeovers does not mean Agilent has infinite spending power, though. Rather, the maximum amount is now constrained by Agilent’s willingness to take on debt.

Agilent ended 2019 “at roughly a little less than one-time net debt levered​,” CFO Robert McMahon said. As such, while Agilent is committed to remaining investment grade, there is scope for the company to take on more debt to strike a big deal if the right target comes along.

McMahon said Agilent’s current position gives it “a lot of opportunity​” and a “fair​ amount of room​” to take on more debt with a commitment to pay it back down.

Agilent’s recent acquisitions reflect the evolution of drug development pipelines. In 2015, Agilent bought Seahorse Bioscience​ to gain a foothold in the cell analysis market.

Several years later, with interest in immunotherapy development soaring, Agilent identified a need to add to the presence it established through the Seahorse takeover.

McMullen said, “We really felt that was a really good first point with a differentiated offering with novel, unique technology that nobody had. But we also felt that we needed to have some more scale to be much more formal in the space​.”

Agilent bought ACEA and BioTek to add that scale. The takeovers have given Agilent a portfolio of cell analysis technologies that it is bringing together into a single informatics platform designed to enable researchers to look at cells from many different angles.