Boston Shop Eyes Medical Equipment Recycler

Sponsor: Great Hill partners

Target: SterilMed Holdings Inc.

Price: Undisclosed

Seller: SterilMed Holdings Inc.

Great Hill Partners LLC is poised to buy SterilMed, a Maple Grove, Minn.-based company that specializes in reccyling medical equipment.

If the deal proceeds, Boston-based Great Hill would make the investment out of Great Hill Equity Partners IV LP, a $1.1 billion fund the firm closed in February 2009. The deal is expected to close sometime next week, a source said. SterilMed repairs and refurbishes medical devices, equipment and instruments, helping hospitals and other health care providers lower their costs and reduce waste.

There has been a growing drumbeat among health care professionals and environmentalists to reduce the amount of waste produced by the health care industry, which disposes of more than 4 billion pounds of waste annually in landfills and commercial incinerators, according to data cited in a March 2010 article in the journal Academic Medicine.

Buyout shops have been eager to buy companies that help trim cost and waste, and the recycling of equipment has become a growing niche. In December 2009, RoundTable Healthcare Partners, a Chicago-based private equity firm that invests in health care, generated a towering 8x return on its investment in Ascent Healthcare Solutions. RoundTable Healthcare sold the company, which collects, sterilizes and re-sells medical devices to hospitals, to Phoenix-based Stryker Corp. for $525 million.

It’s unclear how much equity Great Hill is investing. The firm typically cuts equity checks of $50 million to $150 million per transaction, which can include late-stage investments, minority investments, private investments in public equities (PIPEs), and buyouts. Along with health care, sectors of interest to Great Hill include business, financial, and consumer services, as well as media and communications. The firm closed its third fund at $750 million in March 2006.