Combination with Labco creates the new European champion in the diagnostics industry
European private equity firm Cinven today announces that it has agreed to acquire a majority stake in the Synlab Group ('the Group' or 'Synlab'), a German headquartered provider of human and veterinary laboratory services and environmental analysis across Europe.
This transaction follows Cinven's acquisition in May of Labco S.A., one of the largest European operators of medical diagnostics laboratories, headquartered in France, for an enterprise value of €1.2 billion.
Synlab, headquartered in Augsburg, in Bavaria, Germany, has operations in 23 European countries. The Group has a proven track record of identifying and executing buy and build opportunities and has completed 52 acquisitions since 2011. Today Synlab operates laboratories in approximately 300 locations and employs more than 7,000 people. In 2014, the Group generated sales of approximately €756 million.
Cinven's Healthcare and German teams worked closely together to acquire Synlab. The combination of the Labco and Synlab businesses in the European diagnostics laboratory sector has compelling industrial logic:
- Labco and Synlab both benefit from the same fundamental growth trends in the market: driven by demographic trends, the increasing incidence of chronic diseases and the cost benefits of early diagnosis, as well as the increasing trend towards hospital outsourcing of clinical diagnostics to achieve greater efficiencies and cost savings in health systems (with prediction, prevention and diagnosis spending expected to grow from approximately 20% of healthcare spend today to circa 30% by 2020);
- the combined business will benefit from diversification geographically, by payor and by business model: it will operate in 26 countries across Europe with little direct overlap between Labco and Synlab (Labco concentrates in France, Western and Southern Europe and the UK; Synlab concentrates in Germany, Switzerland and Central and Northern Europe) so that local operations will remain largely unaffected by the combination;
- together, the combined business will have the strongest medical capabilities in Europe and will be a natural partner for innovation to bring new tests to market and to provide improved patient outcomes, including in areas such as anatomic pathology, molecular biology, genetic testing and nuclear medicine;
- Labco and Synlab share impressive track records of growth, through acquisition and organically, coupled with stable and strong cash flow generation; and
- the combined business will be operating in highly fragmented markets across Europe where there are genuine benefits of scale available to operators able to provide diagnostics services more efficiently for patients and payors.
Stuart McAlpine, Partner at Cinven, commented: "Cinven's deal origination relies strongly on our matrix of deep sector and regional expertise. Our investments first in Labco and now Synlab perfectly illustrate how our Healthcare and regional German and French teams have worked closely together to execute our expansion strategy within the European laboratory diagnostics market. We have been extremely impressed by both these businesses and are looking forward to working with both management teams to achieve significant growth in the future."
Alex Leslie, Senior Principal at Cinven, added: "The European diagnostics laboratories market is characterised by strong volume growth, coupled with reduced capacity and high barriers to entry. In particular, the sector benefits from favourable long-term growth trends due to demographics, the cost benefits of early detection of diseases, increased patient choice and advances in medical technology. We have recent experience in overseeing business combinations in healthcare, as demonstrated in the successful integration of Mercury Pharma and Amdipharm in 2012 to form AMCo, a specialty pharmaceutical company which is performing very strongly. We believe that the combination of Labco and Synlab, two highly complementary businesses, will provide clear benefits for patients and payors across Europe and will create a European champion in the industry."
Bartl Wimmer, CEO at Synlab, said: "Synlab has been at the forefront of preventative medical services provision for decades, during which time, the Group has expanded significantly the number of markets in which we operate and the range of diagnostic tests we deliver. Cinven has an excellent reputation as an investor in the European healthcare sector, and already has substantial experience in the diagnostics sector. We are looking forward to working with them on growing our business and being able to offer more healthcare professionals and patients access to diagnostic services internationally to improve the detection and prevention of diseases."
Philippe Charrier, CEO at Labco, said: "At Labco, we are excited about having the chance to work together with the Synlab team. Our two businesses are highly complementary with little direct geographic overlap and we share Cinven's vision of creating a European champion in the diagnostics industry."