Private Equity Firms Buy Medline - The Biggest PE Transaction Since 2007

The Private Equity Firms Involved

The consortium of Blackstone, Carlyle, and Hellman & Friedman bought the majority stake in Medline for $34 billion, beating another private equity consortium made up of Bain Capital and CVC Capital Partners.

What Is Medline?

Medline manufacturers and distributes equipment and supplies used in hospitals, surgery centres and other medical facilities in more than 125 countries and recorded a record annual sales of $17.5 billion in 2020.

Blackstone’s capital will be used to accelerate international expansion and strengthen the company’s global supply chain.

Medline’s purchase represents a wider private equity trend towards health-based companies, spurred on by their pandemic growth. Private Equity news reports that $715 billion of capital has been designated to impact investments, with healthcare now representing the third-largest impact category behind financial services and climate change.

Private Equity Leans Into Healthcare

The UK’s most remarkable deal took place in May, when US private equity firm Clayton, Dubilier & Rice announced a £2.6 billion takeover of a different healthcare company: UDG Healthcare, a FTSE 250 pharmaceutical industry services group.

In June 2021 alone, the US healthcare sector concluded, alongside the Medline deal, five further notable acquisitions, with private equity investors. These include:

• Blackstone invested $250 million into the launch of a new chimeric antigen receptor T-cell therapy company
• Chicago-based Vistria Group confirmed it would recapitalise two data science companies, Medalogix and Muse Healthcare, which both focus on the advancement of home health and palliative patient care
• KKR launched a mental health services company Geode Heath.

Private Equity Trend Towards Bigger Deals

Industry analysts note that the Medline purchase may spark a pick-up in the number of high value private equity transactions. Between 2005-2007, private equity firms made 18 deals valued at $10 billion or above. From 2008-2020, only 10 private equity deals have been made with a valuation higher than $10 billion.

One example of a new multibillion dollar deal is CVC’s proposed leveraged buyout of Japanese conglomerate Toshiba. In April, the European private equity giant announced a $20 billion intended purchase. Details and further negotiations are yet to be announced but if the deal goes ahead, it will mark not only the firm’s biggest deal, but the largest leveraged buyout in Japan’s history.

A second example concerns private equity powerhouse EQT’s proposed takeover of Dutch phone carrier
Royal KPN. The company has so far staved off offers from both EQT and KKR rumoured to value north of £15 billion. The Financial Times has pointed out that hesitancy may stem from the Dutch government in allowing a private equity consortium to acquire a critical national asset.

Just last week, it was announced that antivirus giant McAfee is in talks with private equity firm Advent International for a deal worth more than $14 billion. If the leveraged buyout goes ahead, it will mark one of the largest of the year, addressing McAfee’s $4 billion and placing its equity value at more than $10 billion.

Talking points:

• What are the key industries which have attracted private equity investment?
• What is ‘dry powder’ and is private equity sitting on so much money?