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Alliance Laboratory heads pulled off sale, saved jobs

LabOne is building $21 million facility in Bond Hill

Andrea Tortora, Courier Staff Reporter

June 18, 2004 (Business Courier) -- When Drs. Wendell O'Neal and Vince DeRisio joined Alliance Laboratory Services, they were charged with consolidating labs at various hospitals into one smooth operation.

They succeeded by transforming the labs owned by the Health Alliance hospitals into the largest hospital-owned lab in the country. They pushed for upgrades that staved off competition from national labs Quest Diagnostics and Laboratory Corp. of America Holdings.

But they also were somewhat limited by the Health Alliance's budget. So when Health Alliance CEO Kenneth Hanover decided he would sell the lab operations, lab Vice President O'Neal and Medical Director DeRisio pounced.

The two colleagues celebrated the happy ending to this story at a jovial June 15 groundbreaking, complete with loads of dignitaries and lab employees.

And by the second quarter of 2005, a new $21 million, 136,000-square-foot laboratory in Bond Hill will house more than 500 employees of LabOne, the Lenexa, Kan.-based company that purchased Alliance Laboratory Services for $38.5 million in January.

How that all happened is an interesting lesson in management and acquisitions.

"We were in dual roles as stewards but also as bidders," said O'Neal. "Vince and I had no experience to make these deals."

The two called on financial adviser Bob Weisman, managing director at Great Water Capital Partners LLC.

"They were very proud of the lab they had helped create and improve," Weisman said. "They understood that if it were sold to a consolidator, like Lab Corp. of America or Quest, it would probably be lost to Cincinnati and moved elsewhere."

What O'Neal and DeRisio wanted to do was raise enough capital to buy the lab themselves. Weisman said O'Neal was adamant about finding a way to preserve the jobs of his employees.

Weisman felt there was not enough available capital in Cincinnati to complete the deal.

He advised O'Neal and DeRisio to find a "deep-pocketed partner."

There were rounds of meetings with possible financial and strategic partners. Then the trio met with New York equity firm Welsh Carson Anderson and Stowe, which introduced them to LabOne.

"In our business, timing is everything," Weisman said.

When O'Neal and DeRisio approached LabOne, the company was looking to expand with a second site.

"Things shook out quickly," O'Neal said.

Ohio offered LabOne a deal that includes job tax credits worth $3.3 million for 10 years; a $400,000 training grant; a $500,000 business development grant; and financing of as much as $9.4 million through loans or bonds.

The city of Cincinnati also offered LabOne $2.6 million in tax credits and property-tax abatements.

Also key was site location. LabOne purchased 25 acres in the TechSolve Business Park in part because of easy access to interstate highways and public transportation for employees, DeRisio said.

Processes also were worked out with the Health Alliance to create an operating partnership with LabOne.

O'Neal and DeRisio are now LabOne employees. O'Neal is senior vice president for corporate relations, and DeRisio is executive vice president and medical director of the Cincinnati operation.

The two will use their extensive knowledge of the Health Alliance's six in-hospital labs to make sure they still function as a system. DeRisio said LabOne will now manage those labs while the Health Alliance will own the assets.

Dorman Fawley, Health Alliance executive vice president and COO, said the five-month-old relationship with LabOne has been "smooth and efficient."

"Personnel changes have been handled in a respectful and professional manner," Fawley said. "Our initial review indicates that all performance measures related to service and quality have been met or exceeded."

© 2004 American City Business Journals Inc.