| R. Lewis Dark:
New Cycle Begins for Lab and Pathology Acquisitions
THERE'S A NEW TRANSITION JUST GETTING STARTED in the laboratory testing
industry. For the past two decades, laboratory acquisition activity has primarly
centered around independent clinical laboratories-often owned by
local pathologists. This was true in both the size of the transactions and in the
volume of transactions. Our stories on pages 3-9 describe these processes.
That is about to change. From 2010 onward, laboratory acquisition activity
is likely to center around two different segments of the laboratory testing
industry. One segment involves the laboratory outreach businesses owned
and operated by hospitals and health systems. The second segment is comprised
of the regional and local anatomic pathology laboratories and group
practices owned by pathologists. For both segments, a new cycle of acquisition
activity is now beginning.
In segment one, in the 14 months since January 2009, four significant
acquisitions of hospital/health system-owned lab outreach businesses have
taken place. Plus, there is the investment by Catholic Health Initiatives
(CHI) in Pathology Associates Medical Laboratories (PAML) that happened
in November 2009.
Collectively, these laboratory acquisitions and investments demonstrate
that hospitals and health systems are waking up to the substantial value that
is created from a profitable laboratory outreach program. It is reasonable to
expect that-as hospital CEOs learn about these acquisitions and the prices
realized by the sellers-more hospitals and more health systems will be willing
to entertain the sale of their laboratory outreach businesses.
For segment two involving anatomic pathology laboratories, the simple
fact that will drive laboratory acquisitions is the pending retirements of baby
boomer pathologists who are partners in these laboratories and pathology
group practices. Thatmotive played a role inmost of the pathology laboratory
acquisitions announced during the past 14 months. (See table on page 5.)
I believe the longer-term impact of these developments will be the further
consolidation of both segments of the laboratory testing industry. Deal-by-deal,
hospital laboratory outreach business will be sold and resold into the hands of
the nation's largest lab operators. A similar process will unfold in anatomic
pathology. It will take some time to consolidate the 3,300 independent pathology
practices that exist today, but that cycle of change is now under way.
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Pace of Lab Acquisitions
Increased during 2009
Lab buyers show strong interest in acquiring
both clinical labs and anatomic pathology groups
CEO SUMMARY: After two years of relatively slow sales of
clinical labs, there is pent up demand for lab acquisitions and
a declining supply of independent labs available for sale. That's
the assessment of one expert on laboratory mergers and acquisitions,
who predicts that the accelerating pace of clinical lab
and anatomic pathology practice acquisitions seen in the second
half of 2009 is likely to carry on well into 2010. Professional
investors continue to look for opportunities to buy into the laboratory
testing market.
Predict 2010 To Be Busy
For Lab Owners & Buyers
Capital gains tax rates may rise next year and
that may motivate laboratory sellers to do deals soon
CEO SUMMARY: Along with a recovering economy, the possibility
of an increase in the capital gains tax rate for 2011 may
encourage owners of clinical labs and anatomic pathology companies
to sell their businesses during 2010. That could make
2010 a busy year for laboratory mergers and acquisitions, particularly
if valuations for laboratory companies hold or increase
from current levels. A growing number of credible buyers is
another reason why laboratory sellers are likely to make 2010 a
busy year for laboratory M&A.
(LIVE! Mergers and Acquisitions Audio Conference Recording by Chris Jahnle - LEARN MORE)
Multispectral Tests Use "Smart" Systems To Analyze Tissue
Research Pathologists Use Next Research Pathologists Use Next Generation Methods
CEO SUMMARY: ogists at the Hospital of the University of Pennsylvania are using a new system that combines image analysis
software and algorithms to evaluate images containing numerous
stains and biomarkers. Pathologists teach the system to identify tumor
cells and distinguish them from non-tumor cells. Now used for research
purposes, this sophisticated digital pathology system is designed to do
much of the manual activity required of a pathologist when assessing
an image while producing highly accurate quantitative data.
LAB BRIEFS: BECKMAN COULTER
REPORTS EARNINGS THAT
INCLUDE OLYMPUS ANTHEM CRITICIZED
AFTER RAISING PREMIUMS
BY 39% IN CALIFORNIA LABCORP EXPANDS
ITS BILLING OPERATIONS
IN GREENSBORO, NC MEDTOX REPORTS GAIN
IN CLINICAL LAB VOLUME
AS DRUG TESTING DECLINES
INTELLIGENCE: Late & Latent
ADD TO: GENETIC &
MOLECULAR TESTS
TRANSITIONS: Philip Chen, M.D., Ph.D.,
resigned from Sonic Healthcare
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