Varsity Healthcare Partners’ Probo Medical gears up for sale, Veritas’ Cotiviti reportedly evaluates $15b-plus IPO

Varsity's Probo Medical readies sale and Veritas' Cotiviti reportedly weighs IPO.


In today’s rundown, we’ve got the scoop on Varsity Healthcare Partners’ plans to exit another portfolio business — this time, one that helps extend the life of medical equipment.

The Los Angeles firm is poised to formally launch a process for Probo Medical via Cain Brothers in about two weeks, sources familiar with the firm’s plans told me.

Originally a reseller of refurbished ultrasound systems and ultrasound probes in the US only, Probo under Varsity has expanded considerably. The company has grown both horizontally, into other imaging modalities including MRI and CT, as well as vertically, adding new, complementary services including repair, rental services and an inventory parts business. It also now plays in the UK and France.

Probo expects to produce approximately $29 million in 2021 EBITDA — more than 4x the about $7 million generated in 2018 when Varsity first backed the business in October of that year.

Interest in Probo heightened after folks got educated about the broader medical equipment service and repairs market through a recent sale process for Northfield Medical, sources told PE Hub. Frazier Healthcare Partners in March sold Northfield, a surgical repairs business specializing in endoscopes, at a $475 million valuation. Although sources previously said many pure play sponsors looked at Northfield, the asset ultimately locked down a big valuation via its sale to Agiliti, which Thomas H. Lee Partners took public in April.

For Varsity, a private equity firm investing exclusively in healthcare services, the upcoming process comes as it simultaneously readies a sale of Orthopedic Care Partners. William Blair has been engaged to conduct the process for the musculoskeletal care company, PE Hub wrote earlier this month.

Read my full report on PE Hub.

In other big headlines, another big private equity-backed player operating at the nexus of healthcare and technology appears to be in the works. According to a Bloomberg report, Veritas Capital is considering an initial public offering of Cotiviti that could value the health-care information and analytics company at more than $15 billion.

A final decision on pursuing an IPO hasn’t been made and New York-based Veritas could decide to sell or keep the company, Bloomberg said.
Cotiviti’s next stage of growth has long been speculated about, with the buzz heating up after Hellman & Friedman-backed MultiPlan last summer surprised the market with an agreement to merge with a SPAC in an $11 billion deal.

“Cotiviti might be a good SPAC deal or partner [for MultiPlan],” one source told me at that time. “Cotiviti would be crazy not to think about something like this assuming they can tell a good story,” another source added.

It was in mid-2018 that Veritas through Verscend bought Cotiviti for $4.9 billion, with the combined company taking on the combined name of Cotiviti. The marriage of the two companies aimed to create an end-to-end payment integrity company in healthcare, and it also plays in risk-adjustment. A popular segment of investment, payment integrity essentially ensures that the right payments are made at the right time across the healthcare ecosystem.

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