Behrman makes 3.6x return on research labs

New York- and San Francisco-based Behrman Capital has sold WIL Research Laboratories for $500 million, earning a 3.6x return.

Behrman Capital, a private equity firm based in New York and San Francisco, has completed the sale of its portfolio company, WIL Research Laboratories, to an undisclosed buyer for $500 million (€362 million).

Behrman bought a 66 percent stake in WIL, which provides product safety and toxicological assessment research and services, in September 2004 for $105 million. Behrman earned a 3.6x return on its investment in WIL, and generated an IRR of 63 percent for its limited partners. TPG Growth co-invested in the deal, taking a 9 percent stake. TPG exited its investment concurrently with Behrman.

Behrman managing partner and co-founder Grant Behrman said that his firm bought WIL as a platform for add-ons.

“Our investment thesis was to create a major chemical research organisation,” Behrman said.

Behrman carried out this strategy through a series of strategic add-ons. In 2005 the firm acquired Netherlands-based NOTOX Beheer BV for $60 million in order to gain a foothold in Europe, and Hillsborough, North Carolina-based Biotechnics to give WIL access to pathology services. In 2006 Behrman bought QS Pharma, adding to WIL a drug formulation capability.

WIL also benefited from a generous capital expenditure program, Behrman said. During the firm’s three-year ownership of the WIL, Behrman approved a $60 million for capacity expansion and maintenance. As a result, between 2002 and 2006, WIL’s revenues grew by 18 percent.

Behrman’s most recent fund closed in August 2001 on $1.2 billion. The firm primarily invests in the health care, defence, specialty manufacturing, outsourcing and information technology industries. Its most recent acquisition was the January purchase of Peacock Engineering, a provider of food packaging services, for $172.5 million.

Bear Stearns was financial advisor to Behrman Capital for the transaction, while Goodwin Procter provided legal counsel.