Varsity Healthcare’s Probo Medical gears up for sale

Under Varsity's backing, the global provider of medical imaging equipment, parts, repair and services has grown EBITDA by more than 4x as it has added new geographies, imaging modalities and service lines.

A niche company extending the life of medical products and, ultimately, looking to bend healthcare’s cost curve will soon become available for investment. 

Varsity Healthcare Partners is preparing a sale of Probo Medical, according to people with knowledge of the firm’s plans. The company refurbishes, resells, services, repairs, rents and has an inventory of parts spanning a range of medical imaging equipment, including ultrasound, C-Arm, CT, MRI, PET/CT and X-Ray equipment.

Cain Brothers has been hired to conduct the sale process, sources said. 

Premarketing is taking place and a process is poised to formally launch in about two weeks, according to the people familiar with Varsity’s plans.

Probo is anticipated to field interest from a variety of financial and strategic buyers. The company projects approximately $29 million in 2021 EBITDA – more than 4x the circa $7 million generated in 2018, when Varsity first backed the business in October of that year. Management remains a significant shareholder in the Fishers, Indiana-headquartered business.

Originally a reseller of refurbished ultrasound systems and ultrasound probes in the US only, Probo has broadened its capabilities considerably under Varsity’s backing. It has expanded horizontally, into other imaging modalities, and vertically by adding new, complementary services in the ultrasound market. 

Led by CEO Michael Asmer, Probo primarily offers its services through dealers and other third-party distributors. The company has also expanded geographically beyond the US, entering the UK and France. 

M&A has been a critical part of that playbook, with Probo inking six acquisitions including four so far this year. Elite Medical Technologies and Future Medical Equipment were the first, marking Probo’s entrance into Europe and imaging equipment beyond ultrasounds. These were followed in 2021 by the acquisitions of Mount International United Services, Imax Medical, Tenvision and SonoDepot.

The opportunities presented by Probo are multifaceted. Sources said the platform has a big growth trajectory to build upon in Europe and emerging markets, as well as room to accelerate what is now its fastest-growing offering: the inventory parts business it entered about a year ago. They added that further M&A can be done to support these initiatives and others, including the expansion of existing service capabilities.

For investors looking for ways into healthcare that do not require them to own providers, Probo also presents a unique opportunity. By providing low-cost equipment and repair solutions, Probo aims to drive down healthcare expenses – which is increasingly crucial as hospitals and other providers face immense cost pressures. Probo arguably plays a part in supporting healthcare’s infrastructure – the importance of which covid has shone a light on.

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. “A lot of people learned about Probo through that company,” one person commented.

Concluding a Moelis- and Cain Brothers-run process, Frazier Healthcare Partners sold Northfield, a surgical repairs business specializing in endoscopes, at a $475 million valuation in March. Although sources previously said many pure play sponsors had 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.

Northfield posted $18 million in adjusted EBITDA in 2020, according to a recent earnings call. However, PE Hub sources previously placed the company’s marketed EBITDA between $20 million and the mid- to high-$20 millions, depending on adjustments. 

Other loosely relevant companies include TriMedx, which is owned by Ascension and TowerBrook Capital Partners, and Alpha Source, backed by Baird Capital. 

For Varsity, a Los Angeles-based private equity firm focused on 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. 

Varsity is a lower mid-market private equity investment firm focused on partnering with founders, entrepreneurs and management teams to build leading healthcare services companies. The firm is currently investing out of its $424 million third fund.

Varsity declined to comment and Cain did not return PE Hub’s requests for comment.