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We may not realize the anticipated benefits of our past and potential future investments or acquisitions or be able to recruit or integrate any acquired employees, businesses or products, which in turn may negatively affect their performance and respective contributions to our results of operations.
We have grown our business largely through construction of new centers or acquisitions of existing medical centers, and we will continue to construct new centers at strategic locations and target existing medical centers for our strategic acquisitions. Any existing and future investments in new centers and acquisitions may expose us to potential risks, including, among other things:
· unidentified issues not discovered in our due diligence process, such as hidden liabilities and legal contingencies;
· distraction of managements attention from normal operations during the acquisition and integration process;
· diversion of resources from our existing businesses;
· difficulties in recruiting employees for newly constructed centers or retaining key employees of the acquired business;
· failure to realize synergies expected from acquisitions or business partnerships;
· unexpected delays in completing any such constructions or acquisitions;
· the availability, terms and costs of any financing required to fund constructions or acquisitions or complete expansion plans;
· the costs of and difficulties in integrating acquired businesses, managing a larger and growing business and operating in new markets and geographic regions; and
· acquired business failure to perform as expected and impairment costs it may incur.
We may also fail to identify or secure suitable investment or acquisition opportunities, or our competitors may capitalize on such opportunities before we do. Moreover, identifying such opportunities demands substantial management time and resources, and negotiating and financing such investments or acquisitions involves significant costs and uncertainties. If we fail to successfully source, execute and integrate investments or acquisitions, our overall growth could be impaired, and our business, financial condition, results of operations and prospects could be materially and adversely affected. In addition, we may incur losses at the beginning of a new centers operations when the utilization rate is relatively low due to smaller number of visits while costs and operating expenses are relatively fixed in nature.
Our expansion into the high-end preventive healthcare services market, including the significant capital expenditures involved, may present increased risks.
Since November 2013, we have expanded our services offerings to include high-end preventive healthcare services where we have limited operating experience. We opened and operate five medical centers under our newly established high-end brand, iKang Evergreen, in Beijing, Shanghai, Nanjing and Guangzhou and Hangzhou, respectively, and expect to increase the number of our high-end medical centers based on our growth strategies. Our iKang Evergreen medical centers are located at prime sites at the business districts in the first tier and second tier cities of China and equipped with advanced medical equipment to offer screening services including MRI scans, multi-slice CT screening and various cancer tests and genetic marker evaluations. We also arrange for international experts from world-renowned institutions and teaching hospitals to pay regular visits to our iKang Evergreen medical centers and provide second opinions and U.S. doctor referral services.