Safety and health care group Halma (LON:HLMA) has splashed another £132 million on M&A with the acquisition of French firm Dreampath Diagnostics. The deal takes Halma’s spend in the first four months of its current financial year to over £250 million.
Big spender
Dreampath is the leading provider of automated systems which enable anatomical pathology laboratories to safely and efficiently track, store and manage patient tissue samples throughout the diagnostic process. Its platform combines hardware, software and a high percentage of recurring revenue consumables in a closed system.
The initial outlay is £132 million, with up to £104 million in further performance-related payments spread over two years. Halma expects Dreampath’s revenue for the 12 months to end-March 2027 to be around £28 million.
Today’s deal brings the group’s total spend since the start of April to £253 million, all in the Health Care sector. That’s more than half last year’s record spend of £447 million with eight months still to go.
Halma’s spending on M&A in FY27
| Date | Target | Sector | Price | Sales |
| July 2026 | Dreampath | Health Care | £132m* | £28m** |
| July 2026 | itemedical | Health Care | £20m | £7m |
| July 2026 | Naslund Medical | Health Care | £34m | £7m |
| April 2026 | Surgistar | Health Care | £67m | ? |
Source: Halma
Notes: *Seller has an additional earn-out clause of up to £104m by March 2028 ** Forecast for FY to March 2027
Spreading its bets
In the FY to March 2026, Halma’s organic revenue growth was 17%, of which 8% was down to a single business, Avo Photonics. Part of the Environmental & Analytics division, Avo was acquired in 2011 and has a strong relationship with one of the ‘hyperscalers’. That single customer accounted for 15% of group revenue in FY25 and 20% in FY26.
In the FY26 results, CEO Marc Ronchetti acknowledged the photonics business had provided ‘a tailwind to growth’ over the last few years. He added: ‘As we focus on maximising both the wider portfolio and the photonics opportunity, we do so with a clear understanding that its growth profile differs from that of the wider group in pace, scale and longevity.’
The firm is therefore using the premium cash flow from the photonics business to invest in other opportunities. As it is, organic growth is set to slow in FY27 to low single digits with just a 5% contribution from photonics.
We have been fans of Halma for decades and there are few firms in the UK market to rival it in terms of quality compounders. Its return on invested capital is well above its cost of capital and towards the top end of its target range.
However, there’s no getting away form the fact the shares aren’t cheap. Nor can it stop making acquisitions if it wants to keep the plates spinning. Sensibly, it’s redeploying some of the above-normal returns from the photonics business into other areas.
The problem for us is, the bigger the company gets the more it has to spend to avoid a slowdown. The reason it trades at a premium multiple is precisely because it continues to compound at double digits.
Leaving aside Surgistar, Halma has spent over £184 million so far to add £40 million to £45 million of sales. That compares with £2.5 billion of group revenue last year. We just wonder how long investors will continue to give it the benefit of the doubt when the rating leaves no margin of safety.
Read the press release here: https://www.halma.com/investors/regulatory-news
