Bain Capital buys Great Hill’s PartsSource in $1.25b deal, eyeing rapid expansion

Bain preempts a sale process for PartsSource, eager to invest behind a fast-growing technology business helping hospitals run more smoothly by improving supply chain inefficiencies.

Bain Capital Private Equity sees a vast opportunity to leverage the continued digitization of healthcare processes, with plans to build upon the success of newly acquired PartsSource — a company that, from a B2B perspective, can be likened to an “Amazon of healthcare”. 

The transaction, announced Tuesday, assigns Aurora, Ohio-based PartsSource a total enterprise value of $1.25 billion, sources familiar with the deal told PE Hub.  

The deal provides an exit for Great Hill Partners, producing what looks to be a strong outcome considering the Boston PE firm tends to invest $25 million to $500 million in its platforms. In connection with Great Hill’s May 2017 investment, Madison Capital provided a $36.5 million senior debt facility to finance its LBO. 

Led by CEO Phil Settimi, PartsSource operates an online marketplace of medical equipment maintenance, parts and services connecting almost 19,000 hospitals and clinics with more than 6,000 OEM manufacturers in the US. Its precision procurement analytics technology  helps hospitals to optimize spend, reduce risk and improve supply chain visibility.

“It’s using software tools in a marketplace to drive efficiency — in this case, in the supply chain,” Bain Capital managing director Devin O’Reilly said.

Bain had gotten to know PartsSource’s strategy and management team for about two years, before moving to advance an [anticipated] process, O’Reilly said. Bain due to its groundwork was able put a deal [offer] together “within a matter of weeks”, he said. 

“Bain came fast, strong and hard to preempt the process before we fully launched,” Great Hill Managing Partner Mark Taber said. “They moved with conviction and had a lot of confidence with the company and the team. From the time Bain entered their bid to signing, we came together within 48 hours on final deal terms.”

Robert W. Baird advised PartsSource on the transaction, while TripleTree advised Bain.

Bain has long examined healthcare IT businesses that help hospitals and health systems run more efficiently — be it human resources management or better managing assets, O’Reilly said. At the same time, it sought to back companies that ultimately can help deliver improved patient care. r

“We had been looking for a way to play this theme around the supply chain and asset optimization within healthcare systems for a while,” he said. 

It was through Bain’s learnings from existing and prior investments in healthcare providers like Aveanna Healthcare, US Renal Care and HCA that the firm saw a big need. “Having historically and currently been investors in provider businesses, we see some of the challenges our businesses have,” he said. “In this case, that’s managing all the medtech equipment that’s in their facilities.” 

Likewise, Taber said he saw in PartsSource an opportunity to address a bottleneck facing hospitals ahead of its investment four years back: “Often the clinical engineers spend more time on the phone locating parts and ordering them then doing repairs… If your [operating room] goes down because [a part breaks] getting that fixed is critically important.”

“People have been under-indexed on that problem for a long time,” CEO Philip Settimi said. 

Simply put, the online marketplace built by PartsSource “makes it easy to point, search and click” for used and new parts and supplies, compare different options and ultimately get equipment shipped back to the hospital quickly, Taber explained.

Fast adoption

That said, PartsSource does more than help clinical operations people make orders more efficiently — moving a historically manual process and taking it online. Through its procurement analytics technology, it uses transactional data to provide feedback on supplier performance, which empowers evidence-based decision-making that ultimately drives tighter operations, CEO Settimi explained.

 “We’re using these algorithms to help route hospital orders to the most cost-effective and reliable [parts],” Settimi said. “The healthcare ecosystem is more seamless, air-proof and ultimately far more reliable.” 

The rapid adoption of PartsSource Pro, a subscription product sold at the enterprise level, reflects the company’s growth. The product is now used by 12,000-plus hospitals today, up from only about 100 at the time of Great Hill’s 2017 investment — a year after the product launched. “We’re adding three or four hospitals a week,” the CEO said. 

PartsSource Pro accounts for approximately 50 percent of its revenue today and will approach 60 percent by year-end, according to Semetti. 

The quick acceleration of PartsSource’s bookings growth also serves as a precursor for future growth, according O’ Reilly: “I think it can be many multitudes of the size it is today.”

PartsSource also has an opportunity to grow internationally, enter new end-markets such as post-acute and outpatient settings, as well as build upon its newer, fast-growing services business.

“Whether in life sciences, lab services, dental, healthcare IT or vet, we think there’s a huge opportunity to build an industry leading, category leading [platform] that has all these components to make [healthcare constituents] work that much more efficiently,” added Settimi. “There are tens of billions of dollars of marketplace opportunity in those end-markets.”  

Last year, PartsSource expanded its marketplace network from parts into on-site and off-site repair and service solutions — offering curated and credentialed access to more than 2,000 service engineers. A few weeks ago, Settimi added, it stood up a new dedicated facilities management business. 

For Great Hill, PartsSource marks the latest in a string of recent scale exits at the nexus of healthcare and tech. That includes the majority sales of Quantum Health and RxBenefits, which both commanded $1 billion-plus valuations, PE Hub previously wrote. 

Correction: This report has been updated to correct the misspelling of PartsSource in certain instances.