Russia

Expanding national footprint in the fast growing healthcare market in Russia

Case KDL 

 

KDL, a leading chain of private diagnostic laboratories, was founded in 2003 in a small town near the Ural Mountains by two entrepreneurs who started-off by offering diagnostic services to local state-owned clinics and private clients. CapMan Russia first met with KDL in 2010 when it had grown to become the third largest diagnostic services provider in Russia. In 2012, the CapMan Russia team joined forces with EBRD and UFG Private Equity by acquiring a 100% of the company and invested additional funds to further strengthen KDL’s market position in Russia’s fast-growing private laboratory market.

KDL, a leading chain of private diagnostic laboratories, was founded in 2003 in a small town near the Ural Mountains by two entrepreneurs who started-off by offering diagnostic services to local state-owned clinics and private clients. CapMan Russia first met with KDL in 2010 when it had grown to become the third largest diagnostic services provider in Russia. In 2012, the CapMan Russia team joined forces with EBRD and UFG Private Equity by acquiring a 100% of the company and invested additional funds to further strengthen KDL’s market position in Russia’s fast-growing private laboratory market.

The private laboratory diagnostics became a boom market

The private laboratory diagnostic market has grown by 25–-30 percent annually between 2006 and 2015 following increased penetration of private healthcare services and growth in demand for diagnostic testing, as well as increased complexity of tests performed. The need for modernisation of the sector and the lack of international competition provided opportunities for established national laboratory service providers. After the 2009 crises, the lack of the budget financing forced the state-run hospitals to outsource laboratory services and it has created additional growth opportunities in the retail sector for the private players.

We have identified private laboratory diagnostic services, a sub-sector of the private healthcare market, as one of the most attractive markets in Russia at the moment

"We have identified private laboratory diagnostic services, a sub-sector of the private healthcare market, as one of the most attractive markets in Russia at the moment. The sector’s growth potential will remain in the double digits over the next four to five years as per capita laboratory expenditure in Russia is trailing far behind most developed and developing countries. As one of the leading independent laboratory diagnostic services providers in Russia, KDL is well-positioned to respond to the growing demand and strengthen its position in the market,” said Maxim Popov, Investment Director at CapMan Russia. “All in all, private diagnostics is a defensive market and growing steadily despite of the current economic downturn in Russia,” Maxim continues.

CapMan is supporting KDL's expansion in Russia

KDL has developed a lot since CapMan Russia stepped on board in 2012. Based on the new strategy launched in 2012, KDL concentrated on the growing retail sector with favourable market outlook and decreasing its cooperation with state-owned clinics. “KDL has increased the proportion of retail revenues from roughly 20% to close to 45% of all its revenues as the market has significant growth potential. On the contrary, KDL has decreased services to state-owned clinics close to zero, which came out to be a good decision as federal budget allocations to health care services have been significantly decreased, “comments Maxim Popov.

KDL has increased the proportion of retail revenues from roughly 20% to close to 45% of all its revenues as the market has significant growth potential

Today KDL is the second largest service provider in the retail sector and the number one in the B2B sector in Russia. Since investment, KDL has expanded in almost all the biggest cities in Russia and the amount of its laboratories has been increased from 6 to 15 and its medical offices from 25 to 112. The central laboratory in Moscow has been moved to bigger premises. Thanks to local offices, KDL has gained the trust of regional partners and, unlike many other small regional players, KDL is investing in quality and always buying equipment and reagents from official suppliers.

In addition, KDL has invested in a high-quality IT-system, significantly improving its efficiency and enabling timeless electronic information exchange. The new integrated IT-system has been a clear asset in attracting bigger clients. Furthermore, KDL’s management team has been completely renewed and the company’s personnel in Moscow has moved from several different locations to one building, improving its organisational culture and team spirit. Furthermore, KDL’s structure, reporting and corporate governance practices have been improved to correspond to international standards.

As one of the leading independent laboratory diagnostic services providers in Russia, KDL is well-positioned to respond to the growing demand and strengthen its position in the market

In the coming years, KDL’s objective is to further expand its footprint in Russia, cover all major cities by 2018, and further strengthen its brand. Another important target is to further increase its sales and improve profitability.

During CapMan’s ownership:

  • The number of laboratories has increased almost threefold
  • The number of medical offFices has grown from 25 to 112
  • Personnel has grown to 1400
  • Sales growth 43% annually in 2012–-2015

Investment: 2012

Turnover: 60,585,344 e

Personnel: 1334

Reporting year: 2017

Website: www.kdllab.ru

Net sales development
€million

EBITDA
€million