RPS-PRA: Merger Makes Sense for Mid-Sized CROs, Experts Say

31-Jul-2013 - Last updated on 06-Aug-2013 at 13:40 GMT

Merging Makes Sense for Mid-Sized CROs, Experts Say

PRA CEO Colin Shannon tells Outsourcing-pharma.com merger with RPS will provide geographic and client base growth. Analysts say it is a positive move for two mid-sized CROs.

After the merger of the two CROs (contract research organizations), which will occur following the private equity firm KKR’s acquisition of RPS, PRA CEO Colin Shannon is expected to lead the combined company. RPS will operate as a division of PRA under the leadership of RPS President Harris Koffer and EVP Samir Shah.

Shannon praised the concept of the merger during an exclusive interview with Outsourcing-Pharma.com, adding that RPS’ work in Latin America and Asia will boost PRA’s global reach. He also said RPS’ embedded model for clinical development will be an asset for the joint company in the future.

David Blume, managing director of the investment firm Edgemont Capital Partners, told us the deal “should help PRA’s functional outsourcing capabilities. There are too many mid-sized vendors in the industry and this is another small step in the overall industry consolidation that will occur over the next few years.”

Neal McCarthy, managing partner at the investment bank Fairmount Partners, told Outsourcing-Pharma.com that if PRA can help RPS “get to sell at market prices, they will have a nicely profitable chunk of business.

“RPS has grown over time but they are largely a staffing business with margins that are below industry average. Their reputation is they are attractive to companies that are very price sensitive and they win much of their business based on price,” McCarthy added.

Layoffs?

Any overlap between the companies will be carefully scrutinized, Shannon added. The new company will offer “great long-term growth potential for employees and clients,” Shannon noted.

RPS CEO Dan Perlman already announced that as part of the merger he would leave RPS to pursue other interests outside the CRO industry.

KKR, which also purchased PRA late last month for about $1.3B after the CRO announced plans to go public, will not interfere in PRA’s operations, Shannon told us last month following the acquisition.

“PRA managers are very experienced and if I were KKR I would trust them completely,” McCarthy told us.

The transaction is expected to close in Q3 of 2013 and is subject to regulatory approvals and other closing conditions.