M&A Announcement

Jun 24, 2021

Ladies and gentlemen, welcome to the Analyst and Media Conference Call and Live Webcast. I am Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. At this time, it's my pleasure to hand over to Martin Friendly, Senior Vice President, Corporate Communication and Investor Relations. Please go ahead, sir. Thank you. Ladies and gentlemen, Welcome and thank you for joining us for this conference call and webcast to provide you with more information on Teekin's acquisition of ParaMed Corporation. On the call with me are our Chief Executive Officer, Doctor. Achim von Leo Preston and our Chief Financial Officer, Tanja Michi. The press release announcing the acquisition of ParaMed was issued yesterday evening at 7 p. M. Central European Summer Time. You can find the presentation deck, which we will use in this call on the company website, teakin.com, Under the Investor Relations tab. We will go through these slides first, and then we open it up for Q and A. Please note this call is being webcast live over the Internet and the recording will be available afterwards. With that, let me now turn the call over to Arkin for Neo Prestes. Arkin? Thank you very much, Martin, and Very good morning and good afternoon and welcome from my side as well. So let me first of all introduce ParaMed Corporation to you. Headquarters in California, U. S, ParaMed is a leading OEM developer and manufacturer of medical devices as well as life sciences modules and instruments. The addition of ParaMed's capabilities and customer portfolio will further extend Techem's reach into the life sciences and in vitro diagnostic markets, but With Medical Mechatronics also adds an entirely new business and growth vertical to Techem. The acquisition adds highly complementary expertise and presence in the important life science and healthcare markets in the U. S. And Asia Pacific, Which differentiated development, industrialization and manufacturing capabilities. ParaMed Corporation has operating locations both in the U. S. And Malaysia And offer significant engineering and differentiated manufacturing capabilities to its global clients. In the full year 2021, ParaMed is expected to generate around US280 $1,000,000 or US257 million Swiss francs and EBITDA of around US50 $1,000,000 or CHF 46,000,000. The total consideration for the acquisition of ParaMed will be US1 $1,000,000,000 or CHF 992,000,000. The acquisition of ParaMed is a significant step in Techem's strategic growth plans for the existing life sciences and in vitro diagnostic markets. Furthermore, ParaMed expands TICM's addressable market into the medical devices market segment, where we also see significant growth opportunities. You are familiar, of course, with our strategic growth vectors 1, 2 and 3, and we will continue to strengthen our Life Sciences Business and Parking Business organically and inorganically by adding competencies in lab automation, 1 Expanding our portfolio in life sciences instruments and technologies to as well as adding reagents and consumables to complete the solutions offering With a particular focus on genomics, proteomics and cell analysis workflows, Vector3. Since 2013, we have complemented our organic in these areas with 6 bolt on acquisitions. ParaMed now adds capabilities, which will allow us to further strengthen our offering for the life science and in vitro diagnostic markets through both of our business divisions illustrated by Vector4. In addition, ParaMed now offers access and scale in the sub segment of the 100,000,000,000 medical devices market called medical mechatronics, Lecture 5 on the right hand side of the illustration. This represents a significant opportunity of between USD13,000,000,000 to USD15,000,000,000 Thereby more than doubling our total addressable markets. Combining ParaMed's differentiated engineering and manufacturing capabilities For highly regulated markets with TCAM competencies in system engineering and software development, which are also geared towards innovative yet regulated markets, We believe that we can offer an even more compelling offering to customers in these both markets globally. To describe the synergistic areas of ParaMed She can in more detail, I'd like to outline the complementary offering of OEM components, modules and instrumentation Related to the market in a bit more detail. Techem's portfolio today includes highly innovative components as well as platforms and We spoke development programs for which we are addressing key growth areas like molecular diagnostics, including sequencing, Inmuda Diagnostics, Tissue and Liquid Biopsy Based Cancer Companion Diagnostics, Cell Analysis and many more. ParaMed offers today for those Life Science and IBD segments, Engineering and Manufacturing Solutions with a particular focus on product realization services And industrializing innovative workflows for benchtop solutions and small system integrations. In addition, ParaMed offers complementary components and modules Based on robotic controls, microfluidics and optical technologies. For the medical mechatronics market, ParaMed's core competency is the industrialization and high quality manufacturing of components, modules and entire systems Based on the same building blocks, but complemented with leading expertise in laser and radio frequency technology engineering. Key applications for ParaMed in this market segment include surgical robotics, reconstructive surgery, laser treatments and several more. The medical mechatronics market segment has not previously been accessible for Tecan before. The combination of ParaMed with Tecan's partnering business offering significantly enhances our OEM portfolio and customer value proposition. Today with Techem Cargo and Techem Synagence, Techem offers a broad range of products and services from components to full systems, including consumables, spare parts and even support and shield service offerings. ParaMed, as just discussed, adds to this existing portfolio, But also as an entirely new market vertical with medical mechatronics. As highlighted in the arrows, where purple represents pyramid competencies And red represents Tecan capabilities. We see a significant synergy and cross leverage On the joint products and services, both for the underlying segments we serve and also from a geographical strength perspective. Complementing the development and manufacturing sites of TCAM, ParaMed operates sites in the U. S, two sites in Morgan Hill, California, the headquarters Same site with more than 450 employees, plus a smaller R and D location and the site in Boston, Massachusetts, We are focused on OEM product development. ParaMed also operates a state of the art manufacturing site in Penang, Malaysia It's more than 170,000 square feet or roughly 16,000 square meters and more than 570 employees. All manufacturing sites of ParaMed are ISO-nine thousand and one and ISO-thirteen thousand four hundred and eighty five thirty five And therefore allow ParaMed to supply the highly regulated IVD and MedTech markets, while also leveraging ParaMed's proprietary And highly differentiated quality manufacturing system called DepoC. Avanit's proprietary computer directed assembly system, DepoC, provides a substantially higher level of control and validation for mechanical assemblies. These systems are ideally suited for lowtomidvolume, Hi, mix manufacturing with an operator independent quality assured output, aiming at 0 defect manufacturing. This system is recognized by ParaMed's customers for being ideal to deliver scale and consistency for complex Products demanding highest quality and compliance, particularly, of course, then for regulated markets. The focus At the core of ParaMed's growth and success with global customers and will be the central area of future profitable growth expansion of Tecan as well. So with this, I would like to hand over to Tanja Miki, who will guide you through the financial aspects of this acquisition. Thank you, Achim. In addition to what you have already heard regarding the strategic fit of the acquisition, this transaction delivers a compelling financial profile. First of all, the acquisition will be immediately and significantly accretive to earnings per share upon closing. We expect that on a reported basis, even when including loan integration costs and the purchase price amortization, PPA, Compared to the reported figure in 2020, it will be an EPS increase of around 10% in 2022, the 1st full year of consolidation. Adjusted for amortization of intangibles from M and A net of tax and the integration costs, We estimate EPS accretion in the range of 15% to 20% for 2022. Aramis has recorded Strong growth and healthy operating margins over the past 5 years. In the full 2021, we expect to generate around US280 $1,000,000 in sales. Currently, that is around CHF 257 1,000,000. We also expect approximately US50 $1,000,000 EBITDA or around CHF46 million that is before acquisition related costs. This additional contribution will transform Tienken into a more than CHF1 1,000,000,000 revenue and more than CHF200 1,000,000 EBITDA company. We will provide the group with critical mass and steel, further enhancing our already strong operating cash flow. The strengthened financial profile will fuel future growth in our 2 business segments, both organic and through additional acquisitions. We also anticipate substantial commercial and cost synergies to be achieved through a range of opportunities, including synergies in the supply chain And the internalization of supplies of certain parts, modules and sub assemblies. Now looking at the actual transaction in more detail. Upon closing of the transaction, the total purchase consideration of 1,000,000,000 or about CHF 920 1,000,000 will be funded through a mix of cash on hand, The issuance of new shares and the bond offering. All three elements will contribute to about onethree of the funding. You can see further details of the 3 pillars at the bottom of the slide. We have opted for this mix of funding to preserve our financial also for potential additional M and A transactions. Of course, we are leveraging our strong balance sheet With a net liquidity position of CHF468 1,000,000 at the end of the year 2020, and we are also benefiting From the pretty favorable exchange rate of the Swiss franc versus the U. S. Dollar. Until the closing and the realization of the funding mix Described before, we have obtained committed bridge financing with respect to the purchase price from Credit Suisse. Closing is expected to be completed in the coming months and, as always, is subject to the satisfaction of customary closing conditions. Upon completion, ParaMed will be included in the consolidated financial statements of the Tika Group as part of the partnering business segment. With this, I now hand back over to Achim van den Broekenstein again. Achim? Thank you very much, Tamla. So in summary, We are strengthening our leadership position with the acquisition of ParaMed, a leading OEM supplier with a notable list of blue chip customers Across Life Science Research and Medical Device. We are adding complementary expertise and are broadening our design, Development and Manufacturing Capabilities. We are more than doubling our total addressable market in a financially compelling transaction, We are setting the basis for future growth. Very importantly, the two companies share many aspects in regard to the corporate culture. We are both very customer centric, have clear commitments to the values of ambition, trust and high standards, A very strong focus on quality management in regulated markets. And both of these decisions are driven by a common purpose, To contribute to improving the quality of life of humankind by scaling innovation from research to the clinic. With that, we open the call for Q and A. We will now begin the question and answer session. Webcast viewers may submit the questions or comments in writing by the relative field. The first question comes from the line of Maja Pataki with Kepler. Please go ahead. Hi, good afternoon. I have two questions, please. The first one, could you provide us a split of the revenues Into life science and the medical megatronics and the potential also give us an indication on if there is a difference in the growth rate? And the second question would be relating to the VPOG assembly Software or whatever you want to call it, how much of a gross margin driver could that be for the Tecan standalone business It's applied to the components business or something. Thank you very much. Yes. Thank you very much, Maja. Very good question. I would probably ask Tanja to answer the first question and then I will be a bit more detailed on WIPOC and what we're planning With Wipo going forward and how it's already deployed at ParaMed to assure quality and the production volumes So maybe Tania, if you could take the first question on split of revenues between Life Sciences and the Medical Mechatronics markets. Sure. Thank you, Maja, for your question. So far, this is about 70% on medical devices, 20% on Life Science Research and about 10% on IBD. Okay. So and then maybe on your on the question on Vipoque. So we're actually quite excited about Vipoque and Vipoque has been a technology Infrastructure that has been created by Permit over the past 3 decades and is being very successfully deployed by them In that area, the demand manufacturing environment of low to mid volume and high mix With combination of high quality output, so very low number of defects In production, but also at the end of the testing and in the field. So this is, I think, your key market, I I'll say market recognition and differentiation by ParaMed in their manufacturing environment. And this system is actually being deployed both Identically in Morgan Hill and in Pyeongyang, Malaysia. So of course, when we think about Our own production environment, I would dare to say that we're also pretty good in terms of our quality output and our quality Insurance Systems, which is I think also one reason why we are quite successful in the clinical markets that we're serving. However, Deepak, I would say, from our perspective and my personal experience now takes it to the next level, allowing Also, to deploy these manufacturing environments in the pharma modular system that is ideally suited also for similar products Right. We would use them in our component system development and production, but also in our sub building block modules and even to some extent on the Larger platform. So the big attraction of Vipoque to me is it is entirely scalable and transferable also from site to site once Products are properly implemented. And then it becomes more or less operator independent. So The qualification of the operator to yield very high quality output through people Can be substantially, I would say, lower than what traditional manufacturing regimes would require. So I think there's a lot of things that we have in mind right now to deploy A V POKE environment in also our old facilities, but of course also using the existing infrastructure in Morgan Hill And Jan, for selective production of additional products and new programs that will come into our framework. So I think overall, I think a very good system and then also the basis of course for the profitable growth of ParaMed over the past 3 decades. Okay. Maybe just two follow ups please, if I may. If we look at the split of 70% Medical side. Is there a difference in the growth rates in the margin between the Life Science and the Medical side? And Could you maybe talk a bit to the synergies that you expect to get out of the combination? Because I am a bit surprised at the big share of the medical Mechatronics share of the revenues. I'm Trying to understand if you could give us a bit of an example of where you see the synergies that you could take out. Thank you. Yes. I mean, again, when we look at it also the history of ParaMed, they have been in both segments quite successful And adding constantly new programs and new partners into their OEM for both from a kind of medical device standpoint, But also from a Life Sciences standpoint and probably similar to what we see when I look at the TEC and Life Sciences segment, probably the most dynamic right now also For ParaMed, the area is genomics overall. So I think they have already and are also continue to DRIVE is K Lab and then some of the programs that look at innovative genomic solutions probably as a big Kind of in your focus area. But also on the medical device and medical mechatronics side, the pipeline of programs It's very robust and also the inbound demand for new programs coming their way is quite substantial. And Of course, with their recent addition of more engineering capabilities in the field of, I would say, energy transfer, They have already now started a very comprehensive program to exploit that in terms of new lead generation, new program generation, As well as capturing more of the Life Sciences revenues of such a kind of multiyear interaction with the key accounts. So In that sense, I think we are equally excited about the 2 segments where, of course, Life Science is more complementary And the MedTech is more additive to what we do today, but they're all in their own lives are very Dynamic and very healthily growing businesses for ParaMed. On the synergy side, I mean, of course, there's multiple aspects that we're looking at. And As I said before, I mean, we're quite excited about V Polk and also their production capabilities. They are Probably a bit more vertically integrated than Tecan is today. So I think just from the scale and access to materials, building blocks, More used components, there's a lot we can think of to kind of now use ParaMed in our future growth To complement our production profiles that we already have in Seachem. So I think overall, I would think about it like this is a We are a combination of 2 growth companies. So we're not necessarily looking at it to kind of reduce Necessarily footprint, but it's more about kind of scaling growth and then leveraging very nicely tuned operations and manufacturing footprint, Particularly also with the ability to transfer programs once they mature from the parent Morgan Hill facilities potentially Into the even more cost advantageous Penn Young Malaysia environment. So I think there's a couple of things that probably I wouldn't like to get into too much detail yet, But there is, of course, a lot of programs that we're looking at right now that would leverage that capability. And as I said, particularly with a focus on the regulated aspects of the Production growth that we are looking at in our own strategic framework. Thank you very much for that. The next question comes from the line of Peter Testa with 1 Investments. Please go ahead. Yes. Thank you. I had a couple of questions, please. Firstly, could you just give us a sense, Please, what the organic growth has been at ParaMed over the last 3 years and whether there's been any M and A? So, ParaMed has been affected by COVID negatively in 2020, but prior to that, they had Sorry, growth over the last few years. And we can also see the pickup in 2021 with prospects Beyond being around or above market expectations. Okay. Can you define what solid growth was before? Are we talking 5% 10% 10% plus or 5% what are we talking just to give some idea? Yes, we are talking 5.10. Okay, fine. And then on the inside the business, to what extent do they have consumables or Practically, I mean, from a consumer standpoint, there is nothing. And there is of course underlying always kind of modules in some area of spare parts as they think about their production lines. But It's probably an enormously small business contribution overall. Okay. And then if you look at the opportunity to use The physical manufacturing structure, do you have a sense as to what sort of proportion of value or anything you could say in terms of Teck Can Cost of goods sold that could go through permits manufacturing? And is there anything to do with product registration, You need to get approval of resubmitting a new product to defer equivalents or anything like that you'd need to go through to make that happen? Yes. No, and like I said also in response to Maja's question on BIPOC and how we're looking at this. I mean for me and for us as we plan it, it's more about Kind of accommodating growth for future programs and product and maybe to some extent, assembly or building blocks That go into our infrastructure as well. But I mean, we're not planning any kind of transfer, for example, of an Abbott M2000 or something, I mean, I'm quite happy with the flexibility and dynamics here. So it's more about new programs, new products And leveraging that joint footprint, of course, then there's also new abilities to more effectively design to process design to manufacturing Using the EPO system, we have greatly benefited from an inclusion in the R and D program already, but it's more about future growth and new programs. Okay. And then lastly, can you give a sense of what proportion of PAMED's products are say full products Like Tech End does with its partnerships as opposed to say the component or the part of that that's Maybe consumable in case of some of the medical device business? We haven't broken that As of yet, but maybe just to give you an idea in Life Sciences for them, it's mostly about systems. It's kind of bench top systems. It's kind of what you probably would associate more with kind of systems that you would associate with things like Point of care or kind of research applications, but they are complete systems. In the medical mechatronic, it's a Variety of things. So it starts with franchise around components, but also modules, but then also more functional integrated Systems and what it's like, for example, simulators. And then I would probably speak about more complete systems. So it's a variety Of solutions they are putting, but we have not necessarily broken it down in terms of how many or how much percentages We come from components or modules or on-site systems. Okay. Now I'm just asking because you look on their website for the manufacturing and you look at the different products you see Inside the parts of the business you end up looking at like in my science it looks like the whole Systems, some of it looks like, for example, Roche, they have a machine or Lonza, they have some pieces. And it's not really clear how much is systems and how much is A variety of other things, but okay. Thanks. Okay. Thank you very much and congratulations on the deal. Thank you. The next question comes from the line of Daniel Jarduszkan with Mirabaud. Please go ahead. Yes. Good afternoon as well. Just three questions. The first one, what was very eye catching to me was that The acquired company has 1,000 employees roughly and you yourself have 1500, but You are much bigger than them. So is it I saw the slide with the Malaysian footprint. Is it just Because you have is it more labor intense and the labor, of course, is cheap in Malaysia, but just to see the context. Yes. I mean, the direction, of course, I think it's Andy for the first question, sorry For jumping in. I mean, yes, ParaMed in Canada total employee base is a little bit more than 1,000 and Tecan today This is also more than 2,000 already. So we've grown actually quite a bit over the last couple of years. So I mean, you're right. I mean, of course, I mean, when you look at their footprint, a lot of what they do is assembly and testing and engineering. So Naturally, a bit more kind of labor intense and for example, driving a consumables or reagent business. And then of course, also, ParaMed, Particularly in Penang, Malaysia, as you noted, around 550 employees has kind of capabilities That require more kind of labor steps in between and then also differentiate between maybe more kind of smaller systems and components, but also Handheld and point of care devices that need some more level of human interaction. So but overall, I think it's a normal When we look at our production footprint, it's a normal correlation between what I would assume from kind of headcount Perfected compared to the output and the complexity of the business they're doing in their manufacturing sites. Okay. And the second question is in the medical part, can you talk a little bit about the peers? I mean, Everybody knows Flextronics. So are you now a small Flextronics or yes, that's the question. No, I would say, ParaMed has absolutely fantastic differentiation compared To, I would say, the large volume infrastructure builder companies out there, and it all goes back to what I said earlier with their Proprietary assembly systems and their, I would say, absolute determination on quality And regulatory compliant output. So they have been very successful to differentiate in their part of regulated Yet high mix and lowtomid volume manufacturing needs. So They're not trying to compete on price or these kind of things. I think as you know, see from the financials there, they're very hastily on their profitability. And their differentiation allows them to access those programs that are targeted exactly To this kind of mid volume, high mix environment using their flexibility that allows them to do this kind of operational switches between production Lines and systems in a very elegant and cost effective way. And again, I will come back to the biggest area of differentiation. It's what I call On the Deepak discussion, the 0 defect manufacturing output. And this is, as you can imagine, Probably their biggest selling item and claim to fame, which transports between clients and brings them a lot of inbound business. Also maybe just noting that the commercial front end of ParaMed is very, very lean. So a lot of their business comes from Customer deferrals, recommendations and showcases and these kind of things. So I think they found a very good space In differentiating. And of course, they have also now started to develop a more integrated model. And that's very important as well compared to other companies just offering manufacturing models. And this goes also to the Core of our strategy with ParaMed, as I mentioned, they have integrated now an R and D capability, both in California And in Boston, that allows them not just to do manufacturing production, but also design, development and a very High degree of differentiation in terms of mastering technologies. So this is very, very close also to how we think about the Differentiation in OEM, as you know, so not only differentiate by the production capabilities, but also adding value in life cycle management, In design, but also aiding maybe then the subsequent generation mutations of systems As they go through their life cycle. So I think that differentiation is very important. It has been recognized by Hermes a couple of years ago. They integrated a couple of years already an R and D company in, like I said, California and more recently added a very Well differentiated powerhouse of innovation and development in Boston. Yes, Thanks. So I guess, your the 2 piece are probably small companies as well. So not the Flexronics of the world, is that Correct, in this kind of niche. Well, I think As always, I mean, in this environment, as you know, the discussion from our own work, it's always about in house versus not in house discussion. So Variety of competition is like in house production lines and any other production modality out there in the market. So I would say, again, to what I said earlier, they found a very nice and attractive differentiated niche In the crossroads between life sciences, diagnostics and medical devices, that allows us to grow, as Tania illustrated, Very substantial over the last years. And when we look at it right now, they are very capable and able to attract a very meaningful number of new programs, Including big blue chip names. So I think what they're doing is very well, that is proven and like I said also differentiated particularly through the angle Of Engineering Development Services and the whole complexity of life cycle management options. Okay. And the last third question, Can you quantify the synergies a bit? I mean, in terms of really numbers, let's say, in the year, whatever, 3, 4, 5? So we are anticipating the total cost of the synergies to be around €10,000,000 for the next 5 years, Including the synergies in the supply chain and the internalization of supplies of first and parts and more or less the equivalents in terms of synergies. And the synergies are primarily cost synergies or also top line synergies between the leverage It's a combination of both. So we will work right away on cost synergies, which are similar to Synergies in the supply chain and as I mentioned, the internalization of supplies of certain parts, modules and sub assemblies. So it is really more about further scaling the production. As also Achim talked about the VBox system, And what we are seeing is the potential for introducing the VBOC or the direct support in manufacturing into our existing sites as well. And of course, as you mentioned, that there will also be some further opportunities that we see to expand the OEM component business into the medical mechatronics Maybe just a follow on in addition to what you said, Tanja. I think when I look at the commercial Synergy or the upside opportunity. I think this is the area where we are very excited that we can use and leverage our existing reach into all geographies With a very well established commercial key account framework and as I hinted to ParaMed so far is operating on a very lean 2 person commercial key accounting. So I think there's a lot More reach and then tunnel generation that Tecan can bring to the equation through our partnering OEM channel. So I think That's probably not yet really quantified. And I would probably be cautious before we have a more Thanks for discussion on this kind of upside in commercial synergies, but clearly something we are very excited about and we see as a great potential for the midterm And the long term of this partnership with Paramex. Okay. Thanks very much. One more question from the phone. The next question from the phone comes from Scott Baader with Berenberg. Please go ahead. Yes. Hi, guys. Thanks very much for taking my questions and congratulations on the deal. The first question, please, just really trying to Understand a little bit more about ParaMed. I wonder if you could please help us understand a little bit what the historic growth for this This has been like and the historic margin profile and whether from this point you believe the business to be, say, growth accretive or at the pace of Can you just give some perspective there? I'd also like to understand, please, the capital intensity of this business. Is it similar to the group or less? And lastly, on this area, please. Help us understand a little bit the nature of the partnerships. Is it similar in contract So what you enjoy in your partnering business, long duration contracts? Do you have very strong visibility on the pipeline for the next 5 years or so, is there any particular subcategory where there's a strong pipeline? Just like to get a bit more flavor for the business, please. Perhaps I'll stop there then, Akim, and I have a couple of very short follow ups. Thank you. Okay. Super. Thank you very much, Scott, for the question. I will probably We'll look at Tania to take you through things like CapEx and the historic growth, and then I will talk a little bit more about the Yes, nature of business and the customer traction. Hi, Scott. So I think from a historical revenue growth rate In the last 3 to 5 years, what we can say is that we ParaMed recorded growth rates in the mid single digits. As I mentioned before, the 2020 year was disrupted by COVID with the mid single digit decline. And we are seeing again in 2021 a pickup of the business. And if we talk about maybe more on the target for the In the coming years, as I mentioned also before, going forward, we expect it to be at least in this Mid single digit range with the potential to accelerate the growth to higher single digits with the key product version ramping up and also the sales synergy that As I mentioned in the previous question. From the margin perspective for 2021, we expect The EBITDA margins already to be around 18% of sales. Of course, in 2020, with the mid single digit Decline due to the COVID-nineteen situation, it was somewhat below that. And what we expect again is going Further with the cost synergies that I have mentioned that we can bring it to higher levels. And for 2022, I mean, of course, the increase that I'm talking about would be before any acquisition related costs. So that is something that we will have to take into consideration as well. From the capital intensity, so yes, You have asked if it will be similar to the level we've taken. That is what we see at this stage. So it's pretty low with representing about 2% of sales So that I think addresses a little bit your first set of questions and maybe Ahim can take from that. Yes. No, no. And thanks, Tania. And on the I mean, customer interaction, when we look at the customer partnerships and particularly the duration of It's very, very good to see how long partners typically are with ParaMed. And I think many of them Associating Permit as an enabling partner in their venture. So I mean the Contractual nature of the relationship is very different. Of course, I mean, similar in our world. I mean, when you're supplying components or modules, Typically, you're more kind of running on an annual renewal basis, where, of course, once designed in, it's a pretty sticky environment. And then when similar to us, I mean, when you do a full development program and these kind of things, then it becomes more, If you want more sticky because you're engineering products and capabilities and so forth. But in aggregate, I would say the Paris business is probably Kind of less multiyear contractual as we are. So like I said, more rolling contracts, but with a very high degree of stickiness simply Because I mean, Paramedic has capabilities in production and in quality assurance and testing and validation that are very, very hard to be substituted by someone else. And of course, like I said before, the plan has been and that's been already in execution To add engineering and to add capabilities to become more sticky and to become more complete in these interactions. But overall, I think very happy with looking at the historic and the, I would say, retention and stickiness of their clients. And of course, when we look at the pipeline, Very good to see that every year they're able to sign on a number of new accounts that adds to the inherent growth of their existing partners. And going forward, of course, this is something we will also then like to address and moving even more of these newer partnerships In addition to what ParaMed is doing to the area that you know us for that is then also leveraging wherever possible Maybe some of our own IP or software competencies in future development programs. So I think there's a pretty interesting road ahead of us. But for the time being, I would say very pleased with the retention rate of ParaMed given their obsession and track record in quality assurance and A differentiation in the production setup. That's very helpful. And the 2 quick follow ups then, please. Kenny, am I correct in saying that the 15% to 20% adjusted earnings accretion next year is Almost a pre synergy number and that it would take a few years for you to realize your optimal cost synergies. I wonder if you could please clarify that. And the second question or the third question, so please, I think. Can you talk a little bit more about The Board's decision to issue equity as part of the funding structure for this deal, it doesn't seem entirely, so to say, Necessary to complete this transaction given your cash position and favorable debt raise capabilities. Is it that you do have indeed a very broad pipeline for more targets and that this year we may indeed expect further deals? Thank you. So for the first question, Catan, it's we said we expect an EPS increase of around 10 And for the 1st year for consolidation, and that should include a portion of the And when I mentioned the 15 to 20, that was before, Of course, integration Chorus. So to your point, yes, it will take a few years before, as we said, for the synergies, we said it's about 5 years that we anticipate the total cost of synergies to materialize The total cost of synergies to materialize pooling and that 15% to 20% would be within that range of 3 to 5 years. Yes. And then maybe to your question on the mix of financing, clearly, you're hinting to the exact right direction. We are pretty well aware of the kind of options and tools that we have. And of course, we still maintain some flexibility Between the tools that Tanja called out, between cash, debt financing and equity financing, However, clearly, we don't want to stand still and kind of deprive ourselves of firepower For too long and I probably will again like we discussed in similar circumstances, M and A is always happening when it happens and when we feel Like in this case, very good about strategic fit and our financial end, I always stress that operational and regulatory Diligence requirements to advance target forward. But clearly, what I also tried to illustrate in my short presentation is that we are by no means Disorienting from our growth profiles and opportunities in our Life Sciences segment. So the kind of Yes, vectors that are called 1, 2 and 3 that add to capabilities in life sciences and instrumentation, but also reagents and consumers It's absolutely not off our radar. I again wouldn't dare to say whether this is happening this year or whatever as always. But clearly, what you're hitting at, our ability to leverage our very strong share price In the mix, it's also giving us more flexibility in the future to do M and A maybe in the shorter period of time. And this is clearly something we are looking at. But also in all honesty and now this is a pretty Significant integration and once it's closed, so I'm also I think cognizant of the fact that we have a certain span of attention for M and A. So maybe from a kind of size perspective, that will keep us busy for a while. But I think bolt ons or any other kind of means to reinforce our strategic intent, I could say, particularly maybe now with the increased focus on Life Sciences, it's absolutely on our radar and this is what we try to prepare for. That's very clear. I'll jump back in the queue. Thanks, guys. There's one more question on the phone follow-up, and then we will also have 2 questions from the webcast. The next question from the phone is a follow-up from Mr. Jeloscan from Yourbo. Please go ahead. Yes. Just the 2 small ones. The first, does the management of the ParaMed, I think the CEO is there since 10 years. Does the management stay within Techcon? Or what are the plans there? And the second Sorry to ask, but the seasonality of the business just for our model in the future is Between the first half and the second half, I guess it's also geared more towards the second half? Or is maybe the medical Business, very different between the 2 half year periods. Thanks. Okay. So probably I'll take the first question. So Absolutely, we want to work with the supreme management team that build up ParaMed. And of course, it's always a personal decision to stay or not to stay with TK. But I must say what I've said in My presentation part, I mean, we are very pleased with the culture also with the commitment, the passion and The expertise and knowledge of the ParaMed team, which goes several layers from the CEO, so very capable, very strong, Long serving teams that we are very impressed with. So as I said, for me, this is a growth case. So we want to Continue to grow T10. We want to grow now ParaMed in this new environment. So for me, it's more all hands on deck questions than anything else. But as always, I mean, things can change, I mean, on a personal level. But from an intense standpoint, We would love to work with everyone at Techem for as long as we can. So that's probably what I can Very impressed with the team and very happy with all their accomplishments and their backgrounds and passion for the business. And to take on the seasonality question, I mean, so far, we have not seen significant seasonality. But what is clear is that they are very much volume scale driven, Similar to Tecan, and of course, from that perspective, if you do more volume in 1 month or in the half year, Then you would have some impact on the margin as well. Okay. Thanks. Maybe taking a question, I mean, in the meantime, several questions have been answered that were also posted in Over the webcast, there is one more that I probably want to read now. It is, has there been a bidding process for ParaMed Or were you the only or preferred contender? Okay. So probably I take this so this was Not a competitive process. So this was one of the examples that I think I referred to in many of our Earlier discussions on M and A and where we believe and in particular from our kind of vantage point and position are focusing on in This very dynamic M and A environment that, of course, as we all know, has not slowed down a bit and accelerated quite a bit. So it was a Process that we cultivated over many years and the relationship was built over quite some time. So we were basically able to engage in a private process with the selling entity. So very, very pleased about the program and also our There is another Question around integration costs expected in 2021 and the EBIT The margin levels and the sustainability of those. Anja? So in 2021, we expect the integration costs to be in the mid single digit million And in 2022, higher single digit million amount. And From the current EBITDA margin, I mean, as I mentioned, they are quite volume driven. So we have seen some decrease in margins in 2020 when the volume was affected by the COVID And then it goes back to the 18% level with the higher volume. Now is that already fully optimized From the of course, the setup that they have today, they are probably at the right level. But as I mentioned before, with the cost synergies that we want to bring in and the Potential use of the EPOCH system as well as leveraging on their supply chain and internalization of supplies of certain parts, modules and We will see some improvement, however, not necessarily reflected in Parana itself. But overall for Keegan, that's what we would see. Good. There is one Maybe last question in the line on the telephone line as a follow-up. Please go ahead. Last question on the phone is a follow-up from Mr. Bardo with Berenberg. Please go ahead, sir. Thanks very much for taking the follow-up. Akim, Achim, I wonder if you can describe whether there's a service angle to this business, whether that's something you can scale as part of a broader initiative to offer servicing your partnering offering for diagnostics. And similarly, can you talk to a little bit about the evolving life science business for ParaMed? In your opinion, is this an interesting feeder business for Silicon Valley type companies that you've struggled to, if you like, capitalize on Before perhaps if you can just help us understand that point and whether indeed there are certain critical Components that you now garner as part of this acquisition that will be useful for your future development? Yes. Great questions again, Scott. So maybe quickly on service. I mean, I would probably stand it into 3 Categories, 1 is engineering services, life cycle management and field and repair services. So clearly, I mean, what ParaMed started Doing is adding competencies in engineering, so design and development and I would say Earlier, beginning of a life cycle management proposal, clearly something that we believe we can build and grow and particularly add From a TCAM perspective, quite a bit of experience in system integration, software development and know how, particularly in the field of Life Science and Diagnostics. Now when it comes to field service, this clearly, I mean, it is, I think, An opportunity that we see, particularly again for that segment around Life Science and Diagnostics, in the med tech space, it's probably something where Also we from our side would need to build up competencies to do these kind of things. But of course, repair services or these kind of things Can be kind of included in that model as well. On your second question on the Life Science business, I mean, Clearly, I mean, with the location of ParaMed, particularly in Morgan Hill, California, they have been quite successful, As you outlined to work with innovators in North America, I would say, in California, but also In the wider North American range, most recently also being actually stepping across the Atlantic To some very interesting new developments around synthetic biology or DNA synthesizing. So I think clearly, as you said, this is something we see as Highly complementary and particularly because it is not the, I mean, TECAM automation systems, it's smaller Since bench top systems more integrated fluidics and optics than compared to what Tecan would traditionally offer in terms of the platforms Of Fluent or Evo or even Magniflex. So I think a very nice addition to that portfolio that, of course, we can see deployed in 2 directions. 1, Again, as an OEM offering into a space where bench top or maybe nearer patient solutions or more integrated solutions are of importance and of value, But also for our Life Sciences business, where of course, we are also in the process to identify more integrated bench top solutions for Genomics, proteomics and potentially cell analytics where we started some build outs through our Austrian side. But clearly, when I look at particularly the fluidics And optical competencies of ParaMed, this is highly interesting and complementary to what Tecan would offer into So also in that space, very, very positive in terms of our ability to really join forces and Compliments to, I think, very well differentiated offerings and capabilities. And I think this is for me one of the really exciting parts going forward to exploit that kind of intellectual Component and competency around module builds and integration from very small to very large Systems for the Life Sciences in Visual Diagnostics, but of course also going forward more into the medtech and mechatronics field. Very good. Thanks, Achin. Last quick question from the web for you, Tania, maybe. A gentleman wants to understand the depreciation amortization level, if there is a lot of basically depreciation And what is Asian tutors their investment in the factory in Malaysia? So As I mentioned, the CapEx is relatively low as well and represents around 2% of sales. So no, the G and A is Not significant and compelling to taking. Good. Super. I think with that, we wrap up the call. Okay. So thank you very much, and yes, speak to you soon. Thank you. Goodbye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference.