News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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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.


Merger of Spectrum Laboratory Network and Carilion Labs Creates Big Clinical Laboratory Company

Carilion Clinic and Novant Health will continue to own equity in the new clinical laboratory company

It was big news in the clinical laboratory industry yesterday when Spectrum Laboratory Network of Greensboro, North Carolina announced a merger with Carilion Labs of Roanoke, Virginia. The combined enterprise will have annual revenue of approximately $300 million and immediately becomes one of the nation’s larger clinical laboratory companies.

As announced by the parties involved, Carilion Clinic will hold a 33% ownership interest in the new laboratory company. Novant Health, which holds a minority interest in Spectrum Laboratory Network, will continue as an equity owner and will have a seat on the new board of directors, once the two laboratory organizations are merged into one company.


Spectrum Laboratory Network Sells to Welsh Carson for $230 Million

Acquisition is a deal between two private equity firms

Spectrum Laboratory Network of Greensboro, North Carolina, will be acquired by Welsh, Carson, Anderson, & Stowe. Investment funds managed by Apax Partners are the sellers and the purchase price is $230 million. It is the highest dollar value acquisition of a clinical laboratory during 2009.

The acquisition agreement was announced at the end of last week. It brings Welsh, Carson back into the laboratory testing industry for the first time since 2007. During this decade, Welsh, Carson held an equity ownership in LabOne, Inc., which was based in Kansas City, Missouri and was building a fast-growing business in medical laboratory testing.


New AP Company Buys Five Pathology Group Practices

It may be a good news/bad news development for the anatomic pathology profession. This week a new anatomic pathology company made itself official and announced that it had already signed letters of intent to purchase five pathology laboratories. Aurora Diagnostics, Inc. is the new firm. Based in Palm Beach, Gardens, Florida, it was launched by four lab industry veterans.

Aurora Diagnostics represents good news in anatomic pathology because it wants to buy anatomic pathology groups and laboratories that meet certain criteria. It has $300 million in funding to execute those acquisitions. For pathologists looking to realize cash from their practice, as well as tap a new source of growth capital and management resources, the newly-formed Aurora Diagnostics may be an interested acquirer.

Aurora Diagnostics represents bad news in anatomic pathology because it means a new competitor will soon be putting sales reps on the street to compete for referrals from office-based physicians. For pathologists already facing sustained competition from national AP companies in the market, Aurora Diagnostics may soon be a competitive threat in their market.

The executive line-up at Aurora Diagnostics is comprised of familiar names. Founders of Aurora Diagnostics are James New, Chairman and CEO; Martin Stefanelli, Chief Operating Officer; Chris Jahnle, Business Development; and Kirk Rebane, Business Development. Aurora launched operations in July 2006 and has lined up $300 million of funding from Summit Partners and GSO Capital Partners, LP.

All four individuals are well-known to the laboratory profession. New is the former Chairman and CEO of AmeriPath. In that role, he built the company into a $500 million enterprise before it was sold to Welsh Carson Anderson & Stowe in early 2003. Stefanelli was COO at AmeriPath. Jahnle and Rebane are principals with Haverford Healthcare Advisors in Paoli, Pennsylvania. For more than a decade, Haverford has done business valuations and helped laboratories and pathology group practices in merger and acquisition negotiations.

There are several intriguing aspects to the business plan of Aurora Diagnostics. Expect a more detailed assessment on this nascent company in upcoming issues of The Dark Report. Should you have information or questions about Aurora Diagnostics, e-mail Robert at