Global researcher Kantar marked its first year under the control of Bain Capital by selling off its healthcare division to healthcare IT giant Cerner.

The price tag was $375 million in cash. This valuation represents a multiple of 16-17x EBITDA, by our estimate, which is pricey but very much the going rate for sizable healthcare media and research assets. Still, it’s eyebrow-raising because such thin-air multiples typically attach themselves to growing businesses, which Kantar Health had not been, according to public financial filings from WPP, which retains 40% of Kantar.

Given that Bain bought its 60% interest in the company at about 8X EBITDA, this is a nice premium for a business that generated only 5% of total revenue and was decidedly not core to Kantar’s future.

Perhaps the best news for the health unit is the buyer is a strategic and not another PE firm, which would probably show little patience as management undertakes the overhaul needed to kickstart new growth. Cerner is a terrific company and management will figure out how Kantar Health can expand revenue and margins, but it won’t be tomorrow.

Cerner’s motivation for the deal is clearly to move the company into the lucrative global market for clinical research support, and Cerner said it intends to build “a leading data insights and clinical research platform.” Cerner’s existing Learning Health Network client consortium, a data exchange system, will be the initial integration point with Kantar Health.

We expect Cerner to use its specialized competence in information technology to accelerate the path to market for new Kantar Health products, especially in the fast-growing market for Real World Evidence.

Cerner has wanted access to life sciences and the R&D focus of the pharmaceutical industry. Kantar Health brings that on a global basis. Cerner will now have people who understand both pharmaceutical development and the commercialization process, with deep experience in labeling development. Moreover, Kantar Health brings consulting chops and a bullet-proof reputation alongside clinical trial data-management expertise, particularly in Europe. We’re sure that Kantar Health also knows where there are new opportunities across these markets.

Clinical trials are increasingly digital and so the match with Cerner could put Kantar Health into the unaccustomed but enviable role of industry disruptor, able to offer better and faster data management. Kantar Health is also well-positioned to transfer its success in the Franco/German pharmacovigilance market to the US if Cerner can accelerate recruitment of the needed MD/PhDs.

Kantar Health also carries with it an attractive partnership with electronic health record data specialist Komodo Health. Cerner will no doubt be eager to turbocharge that relationship.

Cultural issues are likely to be the greatest hurdle over the long term. Kantar Health people see themselves as research people focused on understanding patients and physicians in order to improve health outcomes, not data people, so releasing the potential value will take time and a velvet glove, not a hammer.

Back at the Kantar mothership, the competitive landscape grows more combative against a continuous influx of newer, tech-driven insights firms as well as many legacy firms that, like Kantar, have taken on flush PE backers. The $375M should be put to good use to expand Kantar’s tech capabilities through acquisition.

Bain has spent the past year planning the future of its $2B investment and we see the Kantar Health divestment as the first of many dominoes to fall. We’re not aware of any significant internal developments so far that would lift the 8X multiple Kantar earned in 2019, but that should change in 2021. Kantar’s future is now more than ever as a data company -- data that needs to be collected, massaged and delivered more often and quickly. We expect to see the development and marketing of XaaS products (where X may be S[oftware], D[ata], or A[nalytics], among other things) and it will be critical to see how far Kantar crosses the chasm into activation.

The question remains for Bain: How do you go from a research multiple to a tech multiple?

Oaklins |DESILVA+PHILLIPS is an investment bank for clients that operate at the intersection of content, technology and services. This includes enterprises operating within the media, advertising & marketing, education, healthcare, information services and technology sectors. Over 24 years, clients have included Advance Publications/Condé Nast, Deutsche Börse Group, Elsevier, Hachette, JP Morgan Partners, Microsoft, The New York Times, Time Inc., TPG and Wasserstein & Co., among others. The firm is the TMT practice co-head and industry specialist in Oaklins, the world’s most experienced mid-market M&A advisor, with over 850 professionals globally and dedicated industry teams in more than 45 countries. We have closed 1,700 transactions in the past five years.

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