Crescent Capital’s Australian Clinical Labs sale bid stalls

An Australian Clinical Labs team at a drive-through COVID-19 testing site in Geelong West. Picture: Picture: Alan Barber

The sales process for Crescent Capital’s Australian Clinical Labs appears to have stalled, with the private equity buyer that was closing in on the business understood to have stopped working on a potential acquisition.

Apparently, the private equity fund has shied away from the opportunity because of the earnings forecasts in the sales documents that were considered too ambitious.

For the 2020 financial year, Australian Clinical Labs generated $30m in earnings before interest, tax, depreciation and amortisation, according to the information memorandum, and this was predicted to increase to $70m this financial year. The business has been a major beneficiary of laboratory testing for the COVID-19 global pandemic and the understanding is that many around the market did not believe that the forecasted EBITDA levels would be sustainable.

Based on the current earnings forecasts, it is understood that Crescent Capital was hoping to sell the business for about $600m.

Several private equity firms, such as Pacific Equity Partners, were believed to have circled the pathology provider early on, while last year Sonic Healthcare and Healius were understood to be potential buyers. Market analysts say a logical acquirer of the business would be US-based TPG Capital, although it is unclear whether the Texas-based firm has been in the contest.

Bank of American has been working on Australian Clinical Labs sale.

Australian Clinical Labs is the third-largest pathology player in the local market and comprises Healthscope’s former pathology assets, which were bought five years ago for $105m, and the operations formerly owned by St John of God.

Other healthcare businesses up for sale by Crescent Capital include its home doctor service provider 24-7.