Dog-Eat-Drug World

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What's going on?

Friday was a furry good day for private equity firm EQT, which snapped up UK veterinary drugmaker Dechra.

What does this mean?

EQTs been in talks to buy up Dechra since April, but the wooing process had its fair share of hairy moments. See, Dechra found itself in the doghouse when it issued a profit warning in the midst of negotiations. And that update which certainly didnt strengthen the drugmakers negotiating paw-sition helped EQT bag a tidy 5% discount. Still, the deal ultimately came in at a cool $5.6 billion, a healthy 44% markup on Dechras value before the takeover whispers began. That pricey move will help expand EQTs pet portfolio which already includes everything from vet clinics to pet insurers and online retailers putting the firm in a purr-fect position to capitalize on rising pet ownership rates.

Why should I care?

For markets: Low-cost London.
Private equity firms like EQT are always on the prowl for companies they can polish up and resell at a profit later, and this acquisition is a sign London-listed companies are maintaining their appeal. In fact, data shows that investment firms have splashed out almost $100 billion on UK public companies since 2018. That makes sense too: London-listed companies often trade at a discount compared to their US counterparts and a lower entry price should make it easier to profit later on.

The bigger picture: Healthy sector.
Rising interest rates and jumpy stock markets meant that dealmaking hit a ten-year low (setting aside the pandemic dip) in the first five months of this year. But healthcares been a bright spot, growing to make up a juicy 15% of all deals in the same period. And after Fridays Dechra news, there could be more of that to come: after all, demand for healthcare is typically as steady as a surgeons hand.

Originally posted as part of the Finimize daily email.

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