Private equity’s biggest guns are once again showing they can have record-setting buyout firepower when they work as a team.
After recently backing away from so-called club deals that bring together multiple firms, the industry now has its largest acquisition in years. Blackstone, The Carlyle Group and Hellman & Friedman have joined forces to acquire Medline in a deal reportedly worth around $34 billion, including debt.
The deal comes after US private equity firms amassed approximately $721 billion in dry powder as of June 30, 2020 following years of record fundraising outputs. And it may signal that club deals involving multiple buyout shops have returned after they fell out of favor following a series of high-profile flops.
The Medline deal also marks the largest private equity buyout by value in at least a decade, according to PitchBook data. So far in 2021, private equity firms have struck 13 deals in the US worth $5 billion or more, surpassing last year’s total of 11.
This surge in mega-deals was largely expected after US private equity firms again set fundraising records in 2019. But in 2020, much of the funding earmarked for buyouts went unused during the height of the pandemic and at a time when banks were less willing to hand out massive financing packages.
With the economy rebounding and money to spare, investors have begun to spend billions. On Monday, Blackstone also agreed to acquire data center operator QTS Realty in a take-private deal that values the company at approximately $10 billion, including debt.
Following an auction for Medline, Blackstone, Carlyle and Hellman & Friedman emerged with the winning bid, reportedly beating a rival offer from the PE unit of Canada’s Brookfield Asset Management.
Based in Northbrook, Ill., Medline booked $17.5 billion in revenue last year through the sales of its wheelchairs, bandages and other medical supplies. The existing senior management team will remain in place and the Mills family, which founded Medline in 1966, will remain the company’s largest individual shareholder.
Blackstone, Carlyle and Hellman & Friedman will contribute roughly $17 billion in equity for the transaction, with each firm owning an equal stake and Singapore sovereign wealth fund GIC also participating, Bloomberg reported. The funds will be used to help the company fuel its international expansion, expand its product offerings and build out its infrastructure.
Previous buyouts that went bust in the wake of the 2008 financial crisis placed significantly higher debt loads on companies. Among the more notable outcomes: Energy Future Holdings (formerly TXU) filed for Chapter 11 bankruptcy protection in 2014, claiming upwards of $40 billion in debt seven years after KKR, TPG Capital and Goldman Sachs acquired the company for some $45 billion.
Caesars Entertainment filed for Chapter 11 protection in 2015, citing a debt load of some $24 billion around seven years after TPG Capital and Apollo Global Management took the casino operator private in a deal valued at $27.8 billion. And in 2017, Toys R Us filed for Chapter 11 protection with more than $5 billion in debt. That was nearly equivalent to the overall purchase price when KKR, Bain Capital and Vornado Realty Trust took the toy retailer private for some $6.6 billion in 2005.
Carlyle and Hellman & Friedman have some recent history as investment partners. Earlier this year, the duo sold Pharmaceutical Product Development, a publicly-traded clinical research organization, to Thermo Fisher Scientific in a deal that valued the company at around $17.4 billion. That marked a massive return, albeit a decade after they bought it via a $3.6 billion deal in 2011.
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