According to bloomberg's reporting, the medline buyout is a $34B TEV deal with a $17B equity check, and that it was a club deal between BX/H&F/Carlyle/GIC. Assuming a more or less equal split, that's $4B per firm. Assuming that's going to come out of their recently raised flagship funds (all in the $20-26B range excl GIC), isn't that a hefty equity check? If the above is incorrect, curious how the equity is being capitalized.
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If you read careful the news, the current owners (the Mills family) is looking to roll a significant stake, so probably something like 35-45%. So PE funds are probably doing $2bn equity checks.
Not familiar with this one specifically, but don’t forget equity can come from outside the fund’s committed capital. Sellers may be rolling, the funds probably have LPs co-investing alongside them in a holding vehicle controlled by the fund manager, etc.
The equity check written out of the flagship funds of these MFs will probably end up pretty standard after accounting for the big equity rollover from Mills and opening to all co-investors of GPs. GIC probably already a massive LP/co-investor in all the PE firms involved. Medline is a weird business to LBO in the traditional sense. I don't think this thing will ever BK given the business model, unlike consortium deals from mid-2000s. I think it's actually step 1 of floating public equity -- pretty hard to IPO if you've been family-owned forever with no real board or governance set up.
Given the business model and the low risk of BK, what kind of returns do you think the consortium underwrote?
I don't know anything about the numbers here since this is a private business. Assuming this is levered 100% debt/equity (modest but plausible for a deal of this size), and your EBITDA grows at an avg of 10%+ per annum in lockstep with sales (this is assuming no cost-cuts, likely will be some) over the next few years (likely also understated, guessing these guys had a big Covid bump that will have a sustainable tail), I think you can easily back into a 20%+ levered return.
thanks, didn't think of the mills rollover equity and co-investor capital
also, bloomberg reported that one of the finalists for the deal, brookfield asset management, was bidding on its own. assuming its bid was anywhere close to the final TEV price ($34B), how would brookfield have been able to pony up the equity check by itself?
This would depend on the cap structure obviously. But deals like this can see significant co-investment from industry operating partners such as hopsital groups looking to offload operating profits. Considering we are tailing out of a massive revenue boom artifically inflated by government stimlius hospital groups are likely looking to shield profits from unions that will be aggressively targeting benefits package improvements and wage improvements. Specifically doctor owned networks, I recently read that an analysis was done on the lifetime earnings expectations of doctors vs nurses and it turns out that nurses actaully have a higher cost adjusted lifetime earnings expectations when accounting for hours worked. Which kind of makes sense, many nurses can easily earn 100K plus within a few years of graduation and over 150K+ if they are "traveling" nurses which means they just have to drive on average 50 miles from their homes. When you factor in that nurses usually work 3 12 hour shifts per week that commute distance becomes pretty manageable for 80% of the country. Now take into account working earlier in their career, lower cost of education, signfificanly lower to non existant cost of employment (insurance, etc.) and quickly it looks like doctors are not earing as much salary. Which is why doctors are looking to shield bumper year incomes into other assets.
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