Acquisition Research

Identifying Buyout opportunities in the clinical laboratory industry in asia

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Focus on Dental Labs

 

  • Global dental product and services market is moderately attractive

    • Revenues are estimated to exceed US$200b, with c. US$21b coming from sales of dental products (consumables and equipment), and c. US$15b coming from dental laboratory revenues

    • Sales are growing at c. 2% on average, with dental products experiencing faster growth of 6%

    • Industry profitability is relatively strong at 9% NPAT margin. The current entry valuation of 13.4x EV/EBITDA is somewhat higher than the 10 year average of 11.3x, but not excessively so in our view

 

  • Acquisition Theme 1: Buyout of providers of specialised dental training e.g. dental technology

    • Scarcity of trained dental lab technicians in Southeast Asia, coupled with need for deep expertise in specialized dental technology, could make it worthwhile to look into investing in specialized and reputable dental technology training institutions

 

  • Acquisition Theme 2: Selective acquisitions in dental implants & equipment

    • Strong momentum in the ‘value’ implants segment as customers become more cost-conscious, with a number of established possible buyout candidates pursuing viable growth strategies e.g. expanding penetration into fast-growing markets like China

    • Attractive dental equipment segments include Cone Beam 3D imaging technology, CAD/CAM milling technology, practice management software and dental lasers as the dental industry moves towards digital dentistry and less invasive treatments

 

  • Acquisition Theme 3: Roll-up of dental labs regionally

    • Opportunity to roll up dental labs in the Southeast Asia market (much more fragmented than North Asia and Australia) to reap synergies from central labs equipped with automated technology and satellite labs for client sales, customisation & servicing

    • Buy-and-build strategy of backing a dental lab business into a wholly-owned dental chain could reap benefits of greater integration, e.g. satellite lab-in-clinic model to achieve cost efficiencies, faster turnaround time and greater customer satisfaction

    • Specialty dental labs e.g. orthodontics are particularly attractive with far less competition than crowns & bridges where low-cost outsourcing and widespread adoption of automated technology could lead to downward pressure on pricing and margins.