IMS Health Holdings, Inc. (NYSE:IMS) and Quintiles Transnational Holdings Inc. (NYSE:Q) announced today that their respective boards of directors approved a definitive merger agreement, pursuant to which the companies will be combined in an all-stock merger of equals transaction. The merged company will be named Quintiles IMS Holdings, Inc. Based on the closing of IMS Health and Quintiles common stock prices on May 2, 2016, the equity market capitalization of the joined companies is more than $17.6 billion and the enterprise value is more than $23 billion.
What this means: With Q and IMS getting hitched and the rumored talks between LabCorp/Covance and INC Research and companies like inVentiv and Medpace (and likely PPD in the near future) filing to go public, the landscape of the CRO industry is rapidly changing. Now, perhaps more than ever, sponsors will need to keep a handle on CRO performance. ISR anticipates, and has for a while, that this land-grab will likely continue. We are seeing the largest CROs saying “I am big enough, I need to add complementary services” and the smaller VC/PE-backed CROs trying to monetize their value. We would not be surprised to see several mergers of mid-size CROs in an attempt to quickly gain scale.