Acquisition of Dreampath. Strong strategic logic, with runway for significant future growth

Research evidence excerpt

Acquisition of Dreampath. Strong strategic logic, with runway for significant future growth

UpdateMfirepower this fiscal year if needed, so continues to have plenty of headroom to

further execute on its M&A strategy. We also estimate the deal will be 1.8%

accretive to Halma's FY27 EBIT.

Dreampath - What does it do? A market leader in a growing pathology market,

where penetration of automated solutions is growing. Dreampath sells machines

that log, sorts, and keeps patient tissue samples. The solution utilizes hardware and

software to ensure efficient and accurate sample retrieval by lab workers. Managing

samples in an efficient way reduces the number of employees needed at sites, as

well as reducing inaccuracies or mistakes within the labs. Efficient storage is key

because international regulation ensures that samples need to be retained for a

minimum of 10 years, or in some cases longer. The recurring revenues (60% of

sales) are the trays that store patient samples within the systems. Currently,

Dreampath revenues are skewed 70% to the US, and the remainder of revenues are

largely in Europe, which provides the opportunity for further international

expansion.

Significant runway for growth. The growth opportunity for Dreampath comes

from rising penetration of automated solutions, in addition to the already

growing pathology market. Dreampath has seen recent growth rates well in excess

of 30%, and growth of above 30% is expected to continue going forward. The

Dreampath growth algorithm is that the broader pathology market grows at mid-to-

high single digit. In addition to the broader market growth, there is a significant

market penetration opportunity for Dreampath's automated pathology sample

management solutions.