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GTCR buys PathGroup in $1.2B deal

Sarah Pringle
May 13, 2022
Illustration of a pipette dropping droplets of coins into a test tube.

Illustration: Gabriella Turrisi/Axios

GTCR is taking a majority stake in PathGroup, at what sources tell Sarah is a $1.2 billion valuation. Ex-Labcorp CEO Dave King will join the national laboratory company as chairman.

Why it matters: Nashville's PathGroup is one of few lab players of scale that remains independent, and this deal opens up new consolidation opportunities. Such assets are considered a friendly partner to providers that don't want to work with industry giants LabCorp and Quest Diagnostics.

Details: The deal concludes a BofA-run auction that Axios first reported on in February.

  • Existing investors Pritzker Private Capital (previously majority owner) and Vesey Street Capital Partners are reinvesting. Ben Davis will continue to lead the company as CEO.
  • 2022 estimated EBITDA is around $130 million, implying around a 9x multiple.
  • GTCR has deep roots in and around the lab space via investments including American Medical Labs, Dynacare, XFIN and Antylia Scientific.

Zoom in: Scale matters in lab testing, and PathGroup already supports 4,000-plus physician practices and 200-plus hospitals, predominantly in the Southeast and Texas.

  • "It's a large market and diagnostic testing, as we've seen throughout the pandemic, across a number of modalities and disease areas is becoming increasingly important," GTCR co-head of health care Ben Daverman tells Sarah.

Be smart: Hospitals are so resource-constrained that they are outsourcing more and more services like testing, which translates to great white space for companies like PathGroup.

  • PathGroup also can get deeper into personalized medicine (i.e., offer lab tests in concert with prescribing medicines).

What they're saying: Labcorp and Quest don't have as much organic growth as PathGroup, whereas the startups are not disrupting the traditional market, one source familiar with the deal tells Sarah.

  • There are consumer lab tests, "but the bigger labs are players in this market or they are doing the back-end work for the startups," the source says.
  • The proliferation of at-home tests is good for the market, "but that does not displace need to have certified labs run tests that are coming from hospitals or physician groups," Daverman says.

GTCR, Pritzker and Vesey declined to comment on deal terms.

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