
Mesa Labs Completes Acquisition of GKE-GmBH’s Sterilization Indicators Business; Should Accelerate Growth Following Recent Headwinds
Mesa Laboratories has recently completed the acquisition of GKE-GmbH’s sterilization indicators business and its accredited independent testing lab, SAL GmbH. Furthermore, Mesa has entered into a definitive agreement to purchase GKE’s Chinese sales entity, Beijing GKE Science & Technology Co. LTD. This strategic move further solidifies Mesa’s position in the sterilization and cleaning process indicator industry. The company currently has a revenue run rate prior to the acquisition in this segment of approximately $65M.
The total purchase price for the acquisition of these three entities amounts to €85 million, with €5 million associated with GKE China. The transactions were financed using cash from Mesa’s credit facility and cash reserves. The acquisition of GKE China is expected to be finalized in the third quarter of 2023, subject to customary conditions and receipt of necessary Chinese regulatory approvals.
Headquartered in Waldems, Germany, GKE specializes in developing concepts for monitoring, cleaning, and sterilization processes, along with the manufacture, validation, and distribution of biological, chemical, and cleaning process indicators. The Waldems GKE facility will serve as Mesa’s centralized hub for the chemical indicator and healthcare business.
Mesa anticipates that the three GKE entities will contribute between €19 million and €20 million in revenue during the first 12 months of complete ownership. Consequently the purchase price represents 4.3-4.5x forward sales. Moreover, these acquisitions are projected to deliver mid-single digit organic revenue growth over the next several years. Gross profit as a percentage of revenues is expected to align with Mesa’s existing SDC (Sterilization and Disinfection Control) business, and adjusted operating income as a percentage of revenues is estimated to reach 37%-40% in the first 12 months of complete ownership.
Mesa has recently seen some growth headwinds and has cited a more challenging capital purchase environment for slowing growth. However, it’s sterilization and disinfection control business has been growing more rapidly than the overall business.
Gary Owens, President and Chief Executive Officer of Mesa, highlighted the significance of this acquisition, emphasizing that GKE’s competitive portfolio of sterilization indicators is crucial for safeguarding patient safety across various healthcare markets, including hospitals, clinics, and dental services. Owens believes that GKE’s chemical indicators and healthcare-focused sales channels will complement Mesa’s existing SDC division, positioning both businesses for substantial long-term growth. Mesa plans to apply its “The Mesa Way” approach to ensure continuous improvement and drive rapid scaling for GKE, creating added value for customers. The combination of GKE and Mesa’s SDC division forms one of the world’s largest sterilization and cleaning process indicator companies, with over 200 distribution partners serving customers in more than 80 countries.