Why three prominent PE firms see big promise in Medline’s winning formula, KKR buys Atlantic Aviation in ~$4.5b deal

H&F, Blackstone and Carlyle invest in healthcare's vital supply chain.

It’s mega-deal Monday, hubsters!

At first glance, distributing gowns and scrubs to healthcare facilities doesn’t look like a particularly sexy investment opportunity. Turns out, companies like Medline that get such products (and many others) where they need to be around the country are an essential utility of the healthcare system.

Commanding a $34 billion enterprise value in one of the largest leveraged buyouts in history, Hellman & Friedman, Carlyle and Blackstone are joining hands to invest a majority stake in a healthcare products distributor that has quietly become a force with nearly several decades of family ownership.

With or without covid, acute care hospitals and other sites of care want and need a constant supply of low-complexity healthcare supplies — be it sterilized trays or exam gloves. The pandemic, if anything, elevated the importance around healthcare’s infrastructure and supply chain, including the reliability and efficiency of medical products distribution. As one source put it, “you don’t want multiple trucks from multiple vendors arriving each day.”

Medline’s secret sauce? The company is really good at logistics, one source said.
It has also been quietly taking share from other large vendors, sources said, with large public players Owens & Minor and the med/surgical division of Cardinal Health playing defense. Medline’s growing production of private label products helped fuel its gains, increasingly offering lower price points when compared with branded goods, one person said. That ultimately saves money for hospitals and Medline’s other customers, while also fueling its above average margins.

Sources said Medline generates more than $2 billion in EBITDA, with EBITDA margins in the last few years averaging 11 percent to 13 percent — materially higher than the large, well-known publicly traded medical products distributors. (Owens & Minor, for example, has margins in the low-single-digit range.)

Medline is “one of the nation’s largest private companies that no one heard of,” as one source put it.

Check out my full report on PE Hub for more insights on the deal.

That’s it for me! Have a great week ahead, and as always, keep on hitting me up with tips, ideas or feedback at springle@buyoutsinsider.com.