Show an ad over header. AMP

I am the FIRST

Private equity firms buy Medline in largest buyout since the financial crisis

When news broke last month that groups of buyout firms were bidding around $30 billion to buy medical supplies firm Medline Industries, we speculated that it could kick off a new "Golden Age" of private equity, an era that directly preceded (but didn't cause) the financial crisis.

Driving the news: Medline has picked its patrons, a consortium led by The Blackstone Group, The Carlyle Group and Hellman & Friedman. But the details make this feel more like a growth equity deal on steroids than a mega-LBO of yesteryear.

Background: The Illinois-based company is massive, with around $17.5 billion in annual sales. Its products include everything from wheelchairs to PPE to those blue and pink baby blankets that are ubiquitous in hospital nurseries.

  • Some private equity firms have been gently kicking its tires for years — going back to when Medtronic put its own medical supplies business on the block in 2017 — but the actual process got underway earlier this year when Medline hired Goldman Sachs to find it a buyer.
  • Several big-name firms expressed interest, but the second and final round of bidding only included the winning group and Canadian investor Brookfield Asset Management.
  • Every suitor needed to spend extra time assessing what parts of Medline's 2020 financials were pandemic-specific, and which parts were sustainable. For example, it sold tons of PPE last year, but many fewer surgical supplies.

What's the same: Despite some protestations from sources close to this transaction, it is most certainly a "club deal." It might not have six or seven firms participating, but three counts (particularly once you add in LP co-investors). There's a bunch of leverage, even though not nearly as lopsided as some pre-crisis deals.

What's different: No changes to management, this isn't a take-private and Medline's founding family will remain the company's single largest shareholder.

  • Everyone I spoke with said the investment thesis is entirely about growth.
  • Some of that is product line expansion via acquisition, but more is geographic. The vast majority of Medline's business is currently in the U.S., but the PE firms want it to go hard at hospital customers in Europe and Japan.

Context: This seems to be the largest buyout since the financial crisis, and the largest-ever healthcare LBO. But put giant asterisks next to both of those, given the massive inflation of capital markets dollars.

  • Hospital operator HCA, for example, was taken private for $21 billion and is now valued at north of $70 billion.
  • There doesn't seem to be a pipeline of other Medline-sized deals, per conversations with several mega-buyout investors, which means this is unlikely to kickstart a gold rush. Instead, expect big PE deals going forward to be more in the $10 billion to $15 billion range.

Look ahead: Medline's family owners likely could have gotten a higher price in the public markets, but wanted to remain private. In the end, though, they may just be delaying the inevitable, as the PE buyers will want an exit and there isn't a strategic with enough scale to buy Medline.

4 ffp

Why the startup world needs to ditch "unicorns" for "dragons"

When Aileen Lee originally coined the term "unicorn" in late 2013, she was describing the 39 "U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors."

Flashback: It got redefined in early 2015 by yours truly and Erin Griffith, in a cover story for Fortune, as any privately-held startup valued at $1 billion or more. At the time, we counted 80 of them.

Keep reading... Show less

Scoop: Facebook's new moves to lower News Feed's political volume

Facebook plans to announce that it will de-emphasize political posts and current events content in the News Feed based on negative user feedback, Axios has learned. It also plans to expand tests to limit the amount of political content that people see in their News Feeds to more countries outside of the U.S.

Why it matters: The changes could reduce traffic to some news publishers, particularly companies that post a lot of political content.

Keep reading... Show less

Scoop: Amazon quietly getting into live audio business

Amazon is investing heavily in a new live audio feature that's similar to other live audio offerings like Clubhouse, Twitter Spaces and Spotify's new live audio platform, sources tell Axios.

Why it matters: As with Amazon's efforts in podcasting and music subscriptions, the company sees live audio as a way to bolster the types of content it can offer through its voice assistant, Alexa, and its smart speaker products.

Keep reading... Show less

Hurricane Ida exposes America's precarious energy infrastructure

The powerful hurricane that plunged New Orleans into darkness for what could be weeks is the latest sign that U.S. power systems are not ready for a warmer, more volatile world.

The big picture: “Our current infrastructure is not adequate when it comes to these kinds of weather extremes,” Joshua Rhodes, a University of Texas energy expert, tells Axios.

Keep reading... Show less

"We must go further": 70% of adults in European Union are fully vaccinated

About 70% of adults in the European Union are fully vaccinated against COVID-19, Ursula von der Leyen, the president of the European Commission, said Tuesday.

Why it matters: The milestone makes the E.U. one of the world's leaders in inoculations, after an initially lagging vaccine campaign, the New York Times notes.

Keep reading... Show less

What Elizabeth Holmes jurors will be asked ahead of fraud trial

Jury selection begins today in USA v. Elizabeth Holmes, with the actual jury trial to get underway on Sept. 8.

Why it matters: Theranos was the biggest fraud in Silicon Valley history, putting both hundreds of millions of dollars and thousands of patients' health at risk.

Keep reading... Show less



Get Goodhumans in your inbox

Most Read

More Stories