Target: 180 Medical Inc.
Sponsor: Cortec Group
Financial Adviser: Seller: Cain Brothers
Legal Adviser: Sponsor: Blank Rome LLP
The New York-based buyout shop saw an ideal candidate for growth in 180 Medical, which generates more than $25 million in annual revenue and whose revenue and EBITDA grew at 40 percent annually for the past five years, David Schnadig, partner, told Buyouts. Todd Brown, who founded the company in 2002 after a motorcross accident left him paralyzed, wanted to expand the company into new markets beyond Oklahoma but lacked the capital to establish a proper sales infrastructure, Schnadig said. The Oklahoma City-based company distributes disposable, single-use urologic catheters that people can use themselves at home rather than having them administered at a doctor’s office or hospital.
The New York-based buyout shop announced the deal on Sept. 17. Terms were not released, although Cortec typically invests in deals with enterprise values of $30 million to $300 million. Cortec originally bid—and lost—an auction for 180 Medical run by Cain Brothers, a New York boutique investment bank, back in June. However the deal that came out of that process fell apart, Schnadig said, and Cortec executives stayed in touch with both Brown and Cain Brothers professionals and were able to hammer out a deal. It is unclear why the initial sale of 180 Medical fell through.
Cortec financed the deal with about 55 percent equity and 45 percent debt in the form of senior notes issued by Madison Capital Funding, the Chicago-based leveraged financing unit of New York Life Investment Management, which financed previous Cortec deals. The amount of debt is fairly substantial given the difficult financing environment. but Schnadig said that it was premature to say the deal suggests a recovering lending market. “From our perspective, it’s less worse,” he said.
The deal is right in the wheelhouse for Cortec, which has seen success in both health-care products and distribution-related deals. The firm generated about 2.5x what it invested in Royce Medical when it sold the Camarillo, Calif.-based designer and manufacturer of orthopedic products in 2005, and it generated another positive return when it sold Dr. Leonard’s Healthcare Corp., an Edison, N.J.-based online health-care store, in 2007. “We like the space and our investors know we’re comfortable in the space,” Schnadig said.
The investment in 180 Medical was made through