3Ms Shares Could Cross $200 Next Year Thanks To Acelity Acquisition – Forbes

FILE- In this Oct. 24, 2017, file photo, the logo for 3M appears on a screen above the trading floor ... [+] of the New York Stock Exchange. 3M is buying medical technology company Acelity for $6.7 billion, including debt. Acelity Inc., based in The San Antonio, Texas, makes advanced wound care products and had $1.5 billion in revenue last year. (AP Photo/Richard Drew, File)

3M (NYSE: MMM) recently announced that is has completed the acquisition of Acelity, Inc the global medical technology company that provides advanced wound care and specialty surgical applications under the Kinetic Concepts and Systagenix brands. 3M announced its plans to acquire Acelity from a private equity consortium for a total enterprise value of ~$6.7 billion in May. Notably, 3M acquired Acelity at an EV/EBITDA multiple of 11x which is well below 3Ms estimated FY19 multiple of 13.6x

Although, this is the most expensive acquisition in 3Ms history, we think the acquisition is a smart move by the company. Trefis quantifies the impact of the Acelity acquisition on 3Ms operating metrics in the scenario-based dashboard How Much Could 3M Be Worth Post Its Acelity Acquisition? Besides detailing the rationale behind the acquisition, we arrive at the potential upside to 3Ms stock as a direct result of the acquisition.

Why Is The Acquisition A Smart Move By 3M?

#1. 3Ms Addition of Acelity could boost 3Ms Healthcare Revenues by $1.65 billion in FY20

#2. 3Ms Healthcare EBITDA Margin will likely expand by 70 basis points due to anticipated cost benefits

#3. Additional revenues coupled with anticipated cost synergies are likely to provide benefits of around $0.25 per share

Trefis

#4. This pushes our price estimate for 3Ms shares above $200

To sum things up, the acquisition of Acelity will unlock sizable value for 3M over coming months. Acelitys business is growing and 3M has necessary resources at its disposal to make the most of Acelitys position in the growing wound care industry.

Whats behind Trefis? See How Its Powering New Collaboration and What-Ifs ForCFOs and Finance Teams|Product, R&D, and Marketing Teams More Trefis Data Like our charts? Exploreexample interactive dashboardsand create your own

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3Ms Shares Could Cross $200 Next Year Thanks To Acelity Acquisition - Forbes