France’s heavily-indebted private equity-owned medical laboratory groups, including EQT-owned Cerba, face mounting pressure following a government-led audit recommending profit caps and regulatory reforms to curb outsized margins in the sector, according to a report by the Financial Times.
The report, published last month by France’s health sector audit body, called for measures to “bring the cost of biology back to a fair price,” including the introduction of profitability-based regulation.
The country’s medical lab sector has attracted significant private equity investment in recent years, with firms acquiring companies through leveraged buyouts (LBOs) that generate higher margins than the broader medical industry. However, the audit highlighted that despite strong operating margins, “net profitability after financial expenses… is low or unsustainable” due to heavy debt loads.
The report warns that such margin reductions will likely trigger a wave of restructurings among large lab groups. Private equity investors, many of whom may have underestimated the government’s regulatory intent, are being warned of increased risks ahead.
As well as Creba, which is carrying approximately €4bn in debt, with bonds trading at distressed levels amid deteriorating performance, several other major players bear heavy debt burdens. Ardian-owned Inovie faces over €2bn in outstanding borrowings following its 2020 leveraged buyout, while other groups including Biogroup – although not PE-owned – and Cinven-backed Synlab are also under scrutiny due to high acquisition-related debt.
A senior European credit manager described the government report as “a wake-up call for investors,” highlighting the fragile financial position of many leveraged lab groups amid tightening regulations.
The audit emphasises that restructurings are “inevitable” given investor and lender assumptions around sustained high profitability have not held. Importantly, it notes that the public health insurance fund will not intervene to prevent restructurings, as they do not threaten the operational continuity of laboratories.
Neither EQT nor Ardian have commented on the report, while Biogroup did not respond to requests for comment.
