Europe's Cinven Ltd buys Medical Operator Synlab for About $1.96 Billion

Friday, June 26, 2015

European private-equity firm Cinven Ltd. is buying German medical laboratory operator Synlab for about €1.75 billion ($1.96 billion).

Cinven will combine Synlab with France’s Labco, which it acquired for €1.2 billion last month, according to two people familiar with the situation. London-based private-equity firm BC Partners Ltd. will make about 2.7 times its investment from the sale of its stake in Synlab, a person familiar with the situation said.

The combined business will operate in more than 20 European countries and will continue to make acquisitions, the people said.

The European clinical diagnostic sector is worth more than €75 billion, Cinven said when it announced the acquisition of Labco last month. Prediction, prevention and diagnosis spending is expected to grow from approximately 20% of European health care spending to about 30% by 2020, the London-based private-equity firm said.

Private-equity firms use a so-called buy and build strategy to combine rival companies in a sector to streamline costs and boost revenue before selling the enlarged company after a few years of ownership, either through a flotation or to another company. Cinven has a track record of investing in the health-care industry, with previous acquisitions including U.K. hospital operator Spire Healthcare Group PLC, pharmaceuticals company AMCo, and allergy diagnostics company Phadia.

At the time of the Labco acquisition, Cinven said the sector is “growing strongly” as the population gets older and because of an increasing focus on the early detection and prevention of illnesses.

Labco had about €650 million of revenue in 2014 and employs more than 6,000 people. Synlab had €700 million of sales in 2013 and employs about 7,000 people.

Rothschild advised on the sale of Synlab and Barclays PLC advised Cinven.