TICC in Healthcare and Life Sciences: TSS and Jordi Labs Highlight Investor Appeal

 

Key Learnings 

  • Within healthcare, two areas are especially well suited to the value proposition of TICC providers: the pharmaceutical and life sciences and medical device subsectors. 
  • A need for more complex and efficient capabilities is leading these subsectors to outsource more activities, including TICC. 
  • Technical Safety Services (TSS) and Jordi Labs, two recent Harris Williams clients, highlight this growing opportunity for investors. 

Due to several powerful trends, companies in the healthcare industry—including the pharmaceutical and life sciences and medical device subsectors—are increasingly outsourcing key capabilities across their value chains. One area that’s particularly well-positioned to take advantage of this outsourcing shift is testing, inspection, certification, and compliance, or TICC. 

Here, our senior bankers discuss why TICC and healthcare are appealing to investors, two recent Harris Williams clients exemplifying the opportunity, and key advice for buyers and sellers. 

Essential, Recurring, and Growing

TICC encompasses a variety of essential services, from auditing and inspection to testing, verification, quality assurance, and certification. TICC services are typically required by regulators and help companies in virtually every industry avoid risk. Commercial-sector demand for TICC services is also being driven by end customers who are increasingly focused on quality and transparency.  

For their part, companies from across industries appreciate the independence, impartiality, and expertise of third-party TICC providers, as well as the value proposition of outsourcing from both a cost and risk management perspective. Today, approximately 40% of testing and inspection services are outsourced, and that market is expected to grow at a CAGR of 8% to 10% in the medium term.

The combination of recurring demand, long-term resilience and growth, and industry diversification is naturally appealing to a large universe of investors. And one of the most promising end markets for TICC is healthcare and life sciences. 

Given an aging population, increases in chronic illnesses, and growing access to care, global demand for health-related products and services is only going to increase for years to come. Healthcare also has a need for regulatory compliance, as well as a growing interest in outsourcing noncore activities. Like TICC, healthcare products and services are generally nondiscretionary, and many are provided on a recurring basis, insulating the sector from economic swings. Within healthcare, two subsectors are especially well suited to the value proposition of TICC providers. 

One is the pharmaceutical and life sciences space. The demographic trends cited above serve as a backbone of growth for pharmaceuticals. New drug development and improved diagnoses are also driving increased demand for medications, while the increasing complexity of these products makes research and manufacturing processes more complicated as well. This is creating a greater need for clean rooms and capabilities for highly regulated, complex manufacturing with large molecules. In addition, emerging from the pandemic and related supply issues, many pharma and life sciences companies have a strong desire to reestablish domestic supply chains. Due to these factors and their ongoing quest to develop and monetize drugs more quickly and efficiently, pharmaceutical companies are increasingly partnering with outsourcers across their value chains—including TICC providers. 

Medical device companies are also seeing the value in TICC. The trends powering demand for pharmaceutical and life sciences products and services are also behind the growing need for a wide range of medical devices. These medical devices are getting more complex, and the regulatory environment is becoming more stringent. To help meet these expanding needs, medical device original equipment manufacturers (OEMs) are increasingly outsourcing key tasks to specialized vendors. One of those key tasks is testing, inspecting, and certifying the manufacturing process; related company operations; and the devices themselves. 

In sum, the confluence of TICC and healthcare unites a wealth of powerful long-term demand drivers, attracting increasingly intense attention from a growing range of investors. Two recent Harris Williams engagements provide timely insights into what differentiates top-tier opportunities in this space.  

Technical Safety Services

Technical Safety Services (TSS) provides TICC services to customers in the pharmaceutical, biotechnology, healthcare and other life sciences end markets. Its services ensure the compliant operation of controlled environments such as clean rooms, biosafety cabinets, medical gas systems, high-purity water systems, and laboratory equipment.  

“TSS provides on-site technical services that have to happen at regular intervals so its clients stay in compliance with regulatory standards,” says Hepper. “It epitomizes the mission-critical, nondiscretionary nature of this subsector.”  

One factor that sets TSS apart is scale: It’s the largest provider of testing, inspection, certification, and calibration services to the pharmaceutical, biotechnology, healthcare, and other life sciences facilities industries. That scale also includes the largest base of trained and certified technicians in the industry. 

Superior size and sophistication enable TSS to do more for its customers more reliably, contributing to stickier customer relationships. “TSS’s ability to deliver critical, highly technical services helps it become a vital partner for customers operating life sciences and healthcare facilities,” says Semple. 

TSS also has a pronounced focus on growth. Its management team has built a scalable platform, charted a clear organic growth path, and cultivated sophisticated M&A capabilities. “As investors continue to seek resilient businesses providing nondeferrable services, TICC providers with a focus on growth will continue to top the list,” says Lucas. 

Jordi Labs

Jordi Labs provides a full suite of regulatory, investigative and other related analytical chemistry testing services, primarily to medical device manufacturers. Its recent buyer, RQM+, is a leading medical technology company. 

Among other differentiators, Jordi is known for its culture of innovation and its thought leadership in complex testing. “Its proprietary technology and testing techniques enable it to solve the most critical, complex issues faced by its clients,” explains Hepper. 

For instance, Jordi invented a novel “multidetector” approach, which enables it to more efficiently detect chemicals. Likewise, Jordi’s proprietary software allows it to use computer-assisted identification, integrated structure drawing, and a database to serve customers more quickly and with greater quality. 

These capabilities have kept Jordi’s customer base loyal. Its clients include eight of the top 10 medical device companies, who have commissioned more than 14,000 projects over the past 13 years. Consistent demand exceeding Jordi’s capacity has driven the company to invest in employees, space, and equipment in recent years. 

“Jordi Labs and RQM are well positioned to benefit from the growth in outsourced testing services from medical device OEMs who face increasing regulatory demands,” says Hepper.  

A Promising Space for Value Creation

There are significant opportunities for M&A investors in TICC and healthcare. TICC services are typically nondiscretionary, regulation driven, recession resistant, and predictable. Healthcare adds strong demographic drivers and its own dose of nondiscretionary, resilient demand. That makes this a good time for buyers to look for targets that can help them create platforms, build scale, and capitalize on this sector’s potential. 

As exemplified by TSS and Jordi Labs, leading companies combine scale with sophistication to offer more value to customers, simplifying and accelerating the development of lifesaving devices and treatments. They also have a focus on growth and continual innovation, striving to become trusted leaders in this promising space. 

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