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Bio-Techne: Stealth M&A Play Looking Rich Here


  • Bio-Techne has been a steady value creator, operating largely under the radar of many investors.
  • The company has combined organic growth with bolt-on M&A to establish this growth.
  • While the long term growth and promise is to be applauded, a great deal of the quality and continued growth has been priced in already.
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Bio-Techne (NASDAQ:TECH) has been a wildly undercovered stock on this platform, not for any good reasons as the long term value creating track record of the company is quite solid.

I covered the company and the stock in 2016, nearly five years ago and concluded that I was cautious on the stock at that moment, yet ended up buying a small position on a dip early in 2017. That investment has actually done well, very well, but as the share price performance has outpaced the operational performance a great deal, it is time to take some profits here.

A Review Of The Thesis

When I reviewed the investment case of Bio-Techne in 2016, the company announced a bolt-on deal which followed years of M&A activity to diversify the business, which at the time did come at the expense of margin compression. While I was not convinced about the timing in the summer of 2016 amidst higher expectations, I believed it could be a well positioned and good long term stock.

At the time the company was mainly comprised out of a $327 million biotechnology business, developing and selling diagnostic solutions. This is a very lucrative activity, with operating margins at around 50%. This was complemented by a $60 million Clinical Controls business, generating respectable margins around 30% at the time. The company had a third unit after the 2014 purchase of Proteinsimple in a $300 million deal. That unit grew sales more than 20% to $66 million.

All in all, the company generated just over $450 million in sales as the diversification strategy meant that GAAP margins had come down from a very high 54% in the decade before to still a respectable 32% of sales in 2015. On top of the three segments of the company, Bio-Techne reported another deal in 2016, that of the $250 million

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This article was written by

The Value Investor profile picture

The Value Investor has a Master of Science with specialization in financial markets and a decade of experience tracking companies via catalytic company events.

As the leader of the investing group Value In Corporate Events they provide members with opportunities to capitalize on IPOs, mergers & acquisitions, earnings reports and changes in corporate capital allocation. Coverage includes 10 major events a month with an eye towards finding the best opportunities. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

The Value Investor
Thank you very much for your view on TECH and covid-19 impacts. Just a follow up question: Could the same be true with BIO, CRL and RGEN? Thanks
The Value Investor profile picture
@kalu0003 That is a case by case situation. Truth be told, I would have to dive into those specific situations before making up my mind here.
How much of TECH business is tied to Covid-19? What is the impact of the slow down in Covid-19 on TECH? Thanks
The Value Investor profile picture
@kalu0003 Given the lack of revenue growth acceleration over the past year, I would say not that much, either as a contribution to sales and impact on sales.
Excluding amortization of intangibles is a mistake in my opinion as they have a limited life and will essentially need to be replaced like capital expenditures.
The Value Investor profile picture
@dstb Fully agree with your comment if this relates to depreciation. Amortization, not necessarily, or at least not in knowledge intensive industries like this one.
bluescorpion0 profile picture
in a biotech recession all biotechs will be -50%+ . That is going to be painful indeed.
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