Just over a year ago, Cinven took a major step in the execution of plans to create a pan-European clinical laboratory group.
In August 2015 it acquired French laboratory group Labco, followed in October by the acquisition of Synlab, based in Germany. The two companies operated in a large, fragmented market that promised economies of scale. They both come complete with solid M&A track records and complementary geographical footprints. These elements meant, post merger, the platform was ideally sited to pursue further significant bolt-ons and opportunistic buys.
“By putting Labco and Synlab together we have created by far the market leader in the sector with complete continental coverage,” says Cinven partner Alex Leslie, who sits on the healthcare sector team. “We’re transforming the businesses, changing their geographical, business and product reach. The combined enterprise, from a multiple perspective, is worth more than each of the sum of the parts.”
One of the significant operational changes already made at the combined entity, Synlab, was the creation of a single management team and a number of new senior roles. These include a new chief operating officer, chief commercial officer (CCO) and chief strategy officer, who oversees its cross-border buy and build activity.
Aligning management to its operational structure “has taken some time, but we are starting to feel the benefit of that on the ground. The role of the central functions is to support each country team to run their business,” Leslie says.
Another significant priority “is to streamline operations in the practical sense”, says Cinven portfolio team partner Immo Rupf. This encompasses procurement and suppliers, the location of equipment, and the organisation of laboratories. “We established a view on what a lab should look like for a target operating model.”
A third has been to develop an IT “blue print” for the company in place of proprietary systems developed by individual laboratories. A fourth is to percolate commercial best practice through the group, with the help of the new CCO, involving “choices about how we acquire new customers, avoid customer churn, in-sourcing or out-sourcing specific tests,” says Rupf.
Equally important has been the creation of a “bolt-on machine” run by management using a template developed by Cinven’s portfolio team. The template outlines the way management presents opportunities to the board’s investment committee; tracks the delivery of synergies within each bolt-on; and “simplifies decision-making as much as possible so we don’t become a bureaucratic block on the ability of the company to execute on its strategy,” Leslie says.
“There will be targets for the year, but the origination, execution and integration of them is done by management,” says Rupf. “In Synlab’s case, origination is often at the local level.”
A year on, Synlab has already completed a number of bolt-ons and has a strong pipeline of deals, averaging more than one transaction a month. It currently operates in 35 countries and is eying expansion into emerging markets, especially Latin America.