Danaher (DHR) early this morning announced plans to acquire Swiss-based Nobel Biocare for $2.2 billion (CHF 2bn / EUR 1.7bn). Nobel is a leader in the dental implant industry and will become a "cornerstone" of Danaher's dental platform.

With Danaher's dental segment already bringing in $2.2bn of sales, Nobel will increase sales by about 34%, adding another $750 million. Nobel will also be adding about $118 million in EBITDA (EUR $91 million).

Looking at Nobel's trailing twelve month figures, the deal multiple seems very high at 22.6x EBIT and 16.8x EBITDA. However, I believe Danaher is paying an elevated multiple for several reasons. First, Nobel is a high quality business that provides premium level products. Second, the dental implant industry appears to be at the nadir of its business cycle. Thirdly, by applying the Danaher Business System (DBS), Danaher should be able to get EBITDA margins back to above 20% in the next few years. All of this suggests an adjusted acquisition EBITDA multiple of 15x or less.

Below is a chart I created showing the financials for Nobel, Straumann (another competitor in the dental implant space), Danaher as a whole, and Danaher's dental segment by itself. Hopefully it provides some perspective on this industry and acquisition in particular.


Although I wouldn't call this deal a home run, I think Nobel will be a good deal for Danaher as it improves the entirety of their dental segment's offering and there is room for margin improvements via DBS. Even after the deal, Danaher will still have $8 billion of M&A capacity after this sizable deal. Hopefully they will be able to put more cash to work in the near future.


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