Family Medical Equipment Biz Nabbed for $34 Billion by Private Equity Royalty

Located 20 miles outside Chicago, the village of Northfield, Illinois—population 5,534—isn’t exactly known as a hotbed for M&A activity.

But over the weekend that’s where three titans of private equity—Blackstone Group, Carlyle Group and Hellman & Friedman—agreed to spend $34 billion on a little-known family-owned company called Medline, a quiet giant in the world of medical equipment. It’s a huge deal by the numbers, and it has even bigger implications for private equity.

PE Wakes Up Again

The Medline deal will count as one of the largest leveraged buyouts since the 2008 financial crisis, and a sign that private equity is back in the mood for big deals after more than a decade of gun shy behaviour:

• Between 2005 and 2007, private equity firms made 18 deals worth $10 billion or more, according to Dealogic. In the 14 years since, they’ve made only 10.
• Firms are now sitting on a record $1.6 trillion in unspent cash, according to data provider Preqin, and obviously are looking for something to do with it.

This month, firms seem to have finally gotten some swagger back. CVC Capital submitted a $20 billion bid for Japan’s Toshiba, setting off a potential auction. Stonepeak Infrastructure and Sweden’s EQT are bidding $15 billion together for Dutchh telecom Royal KPN.

No Guarantee: Medline drew bids from a who’s who of major buyout firms, and it’s easy to see why: the company manufactures supplies for hospitals, surgery centers, and medical facilities in more than 125 countries, racking up $17.5 billion in annual sales.

But buyouts are hardly risk proof: many of the major deals struck before the 2008 crisis produced middling returns— and TXU Corp filed for bankruptcy protection when the weight of debt became crushing under recession.

Pretty Please: Despite the risks, it’s pretty clear the Medline buyers were not taking no for an answer: senior executives from Blackstone, Carlyle and Hellman & Friedman all visited the company’s Northfield HQ to charm the Mills family, who founded the company in 1969.