Avista acquires majority stake in Probo Medical for $450 million

• In 2021, Probo produced north of $30 million in EBITDA — more than four times the near $8 million generated in 2018, sources say. Varsity first backed the founder-run business in October of that year.
• Cain Brothers and Houlihan Lokey advised Varsity, which is reinvesting a minority stake with the deal.
• Varsity and Avista declined to comment.

Why it matters: Hospitals and health care providers are facing immense cost pressures and the pandemic has compromised budgets even further. Probo, by extending the life of medical equipment, is one way to meaningfully achieve savings.

• The acceptance of refurbished equipment and parts is growing both domestically and outside of the U.S.
• Efficacy is equivalent, but typically 40% to 50% cheaper when compared with new equipment, driving big savings, one source says.

Zoom in: Founded as a reseller of refurbished ultrasound systems and probes in the U.S. only, Probo has transformed into a multidimensional player under Varsity.

• The Fisher, Illinois-based company, now with 14 locations in the U.S. and Europe, has expanded into other imaging modalities beyond ultrasounds, offering C-Arm, CT, MRI, PET/CT, X-ray equipment and more.
• Driven by an aggressive M&A playbook, Probo has consistently added new recurring services and today offers installation and de-installation, field-based repair service, equipment sales and rentals, parts supply and repair.
• Probo doesn't compete with OEMs, but offers the various services they can’t or don’t want to do.

State of play: Avista's investment adds to a recent uptick in investment activity in the medical equipment service and repairs universe.

• Sentinel Capital Partners in December acquired TTG Imaging Solutions, a provider of nuclear medicine and molecular imaging repair services.
• Frazier Healthcare Partners in March 2021 sold Northfield Medical, a surgical repairs business, to Agiliti, in a $475 million deal. Interest in Probo heightened after investors got educated about the broader industry through this process, sources told Sarah last summer.
• Other relevant companies to watch include founder-run 626 and Alpha Source, which Baird Capital backed in 2015.

Separately, the equipment supply chain is getting digitized.

• In a $1.25 billion deal, Bain Capital last summer invested in PartSource, which operates an online marketplace of medical equipment maintenance, parts and services connecting hospitals with OEM manufacturers.

The bottom line: This is a big and fragmented global market, which, as history has shown, means more private equity money is likely to follow.