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Prices of Clinical Pathology Laboratories Are Rising Due to Buyer Demand

Conference on May 5 about clinical laboratory and pathology mergers and acquisitions

For owners and sellers of clinical laboratories and anatomic pathology groups in the United States, the past six months have been rosy times. That’s because buyers have stepped up and paid strong prices for the medical laboratory companies and pathology testing firms that came to market during this time.

Experts predict that merger and acquisition (M&A) activity in the clinical laboratory industry will continue to be robust. Several factors reinforce this optimistic prediction.

First, on the buy side, there is both strong demand for established laboratory companies and a growing number of motivated buyers. Both are reasons why some financial analysts say it is now a “seller’s market” for clinical lab and pathology group sales.

Diversity of Buyers for Clinical and Pathology Laboratories

In fact, the diversity of buyers illustrates why the prices paid for select lab companies in recent sales have been so strong. The nation’s largest publicly traded lab firms, which include Quest Diagnostics Incorporated (NYSE:DGX), Laboratory Corporation of America (NYSE:LH), and Sonic Healthcare Ltd. (ASX:SHL), continue to bid strongly—particularly for laboratory organizations they deem have the highest strategic value for their business.

Some financial analysts say it is now a “seller’s market” for clinical lab and pathology group sales.

Some financial analysts say it is now a “seller’s market” for clinical lab and pathology group sales.

But in recent years, private buyers have regularly participated in bidding for lab testing companies that come to market. These are typically private equity firms and investment companies whose executives see laboratory testing as a top investment opportunity. Welsh, Carson, Anderson, & Stowe is one such private equity company. In the past 18 months, it purchased both Spectrum Laboratory Network and Carilion Laboratories. This combined lab company was renamed Solstas Lab Partners in February, 2011.

Major healthcare corporations have also taken an interest in laboratory testing, as shown by two recent transactions. Six months ago, Clarient, Inc. was acquired by GE Healthcare, a unit of General Electric Company (NYSE:GE). The purchase price was $587 million and Clarient’s 2010 revenue totaled about $110 million.

Similarly, pharmaceutical giant Novartis (NYSE:NVS) purchased pathology testing company Genoptix, Inc. in January, 2011. The sales price was $470 million and Genoptix posted revenues of about $196 million during 2010.

Anatomic pathology company CBLPath Inc., came to market last November and was snapped up by Sonic Healthcare. The Australia-based lab company paid $123.5 million for CBLPath, which had annual revenue of about $80 million. Sonic also purchased a clinical laboratory and an anatomic pathology laboratory in California in recent months.

Baby Boomer Pathologists are Now Ready to Retire

The demographics of the baby boomer generation are already increasing the number of laboratory companies that come to market and seek either a seller or an investor. This year—2011—is the year when the oldest baby boomer pathologists and lab owners turn 65 years old.

For this reason, among others, during the next 48 months, a sizeable number of the nation’s 3,300 private pathology group practices will lose one or more partners to retirement. This trend will have several consequences. One, it means some pathology groups may put themselves up for sale as a way to cash out the equity accounts of the retiring partners.

Two, other pathology groups may decide to accept capital from equity investors as a way to raise the money necessary to buy out the interests of retiring pathologists. This approach enables them to continue in business, while providing them with the working capital that allows them to improve their competitive market position.

Clinical Laboratory and Pathology M&A Conference in New Orleans

All laboratory sellers and laboratory buyers will have the opportunity to gauge the current lab M&A marketplace when The Dark Report and Dark Daily convene the fourth annual “Clinical Laboratory and Pathology Mergers & Acquisitions” conference. It will take place on Thursday, May 5, at the Sheraton Hotel in New Orleans, Louisiana.

One of the noteworthy sessions will be conducted by Michael R. Rodriguez. He is the Senior Vice President and Chief Financial Officer at Clarient. Rodriguez will discuss the strategies Clarient used as a seller, and the lessons learned as this laboratory company negotiated the purchase price and sales terms.

During the M&A conference, there will be three special learning tracks. The first is for independent laboratories. The second is for hospital/health system laboratories and outreach programs. And, the third learning track is for specialty testing laboratories.

Over the course of one day, more than 31 speakers and sessions will cover the full range of laboratory M&A activity. A reception and lab buyer showcase will take place on Wednesday evening, May 4. This is a “must attend” event for every lab owner, seller, buyer, or advisor.

Take the time right now to visit the Executive War College website. See how many ways these 31 M&A conference speakers—along with the other 50 speakers—can provide you with ideas, inspiration, and examples that you can take back and implement immediately in your own laboratory. Then reserve your place to be with us on May 3, 4 and 5 at the New Orleans Sheraton Hotel for the single-most valuable educational investment you’ll make this year.

Register now, so you can guarantee your place at this vital event!

Related Information:

GE Healthcare Pays $587 Million to Purchase Clarient, the Specialty Pathology and Cancer Testing Firm

Novartis to Pay $470 million to Buy Pathology Testing Company Genoptix

Sonic Healthcare Buys California Clinical Pathology Laboratory Company

The Executive War College May 5th Program: Clinical Laboratory and Pathology Mergers & Acquisitions

THE DARK REPORT: Sonic Healthcare News

THE DARK REPORT: Sonic Healthcare and Clarient News

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