Pharmaceutical Product Development, or PPD, is being taken private by affiliates of the Carlyle Group and Hellman & Friedman in an all cash deal valued at $3.9 billion. The two private equity firms are paying $33.25 per share for PPD, a 29.6 percent premium over its closing price September 30.

The deal is a turn-around for private equity buyouts, which have been slowed down in the third quarter due to market volatility and a tough financing environment. A Morningstar analysis issued on the same day the deal was announced noted that the contract research industry had turned a corner since a slowdown, which had started in 2008 with the global economic recession. As they experienced cutbacks in orders from pharmaceutical partners, CROs began making deals with each other to strengthen their global infrastructure, especially in emerging markets.

“The emergence of the strategic partnership model, which has seen the world’s largest drugmakers pair up with leading CROs as long-term research and development partners, has helped fuel this return to growth in the industry,” wrote Morningstar analyst Lauren Migliore.

Carlyle and Hellman & Friedman see a strong upside potential for CROs going forward as pharmaceutical companies increase their global presence and look to outsource research. PPD, based in North Carolina, has also increased its global reach, with offices in 44 countries. The company offers a wide range of services including drug discovery, development, and clinical trial management services.

Selling PPD to Carlyle and Hellman & Friedman “provides an attractive return for our shareholders, while also ensuring a secure foundation and commitment to investment, innovation and excellence for PPD clients and employees as the company builds on its 25-year history of success,” says Fred Eshelman, PPD’s founder and executive chairman.

The boards of directors on both sides of the deal have approved the merger agreement, which is expected to close by the end of the year, subject to shareholder approval and regulatory requirements. Under the merger agreement terms, PPD can ask for buyout offers from third parties and consider unsolicited offers for 30 calendar days from the date of the agreement. But Carlyle and Hellman & Friedman have the right to match a better offer.

The deal has fully committed financing, through a combination of equity provided by Carlyle Partners V, a $13.7 billion U.S. investment fund, and Hellman & Friedman Capital Partners VII, an $8.9 billion fund, and external debt financing commitments provided by Credit Suisse, JP Morgan, Goldman Sachs, and UBS.

The PPD deal is the largest private equity buyout of a contract research organization in the past three years but it is not the first, according to Burrill Report data. Other deals have included Nautic Partners’ acquisition of Omnicare Clinical Research in April 2011; Thomas Lee Partners’ $1.1 billion buyout of InVentive Health in May 2010; Avista Capital Partners and Ontario Teachers’ Pension Plan’s acquisition of INC Research for $600 million in August 2010; and Warburg Pincus’ purchase of ReSearch Pharmaceutical Services for $227 million in December 2010.