RoundTable Healthcare Inks Its Largest Exit

Target: Ascent Healthcare Solutions

Price: $525 million

Buyer: Stryker Corp.

Seller: RoundTable Healthcare Partners

RoundTable Healthcare Partners stands to score its largest profit ever through its $525 million sale of Ascent Healthcare Solutions, a Phoenix-based company that collects, sterilizes and re-sells medical devices to hospitals at a discount.

The company is slated to be acquired by Stryker Corp., a publicly-traded maker of orthopedic implants and surgical equipment, in a deal expected to close by the end of the year.

In the sale to Stryker, RoundTable Healthcare has agreed to sell its entire 30 percent stake in the combined company, helping to generate 8x RoundTable Healthcare’s original investment, according to Lester Knight, a managing partner at the firm.

For the Chicago-based firm, the story of Ascent Healthcare began in 2001 with the $21 million, all-equity acquisition of a 90 percent stake in medical device reprocessor Vanguard Medical Concepts Inc. RoundTable Healthcare executives were drawn to the company in part because of its emphasis on generating cost savings for clients, which is perhaps the most significant objective of health care providers today. “We saw that trend coming eight years ago,” Knight said. In 2005, Vanguard Medical merged with another reprocessor, Alliance Medical Corp., which had the backing of firms such as Apax Partners and Delphi Ventures, to form Ascent Healthcare.

Knight said that during its ownership the firm and its co-investors helped expand the company from one that posted $11 million in sales in 2001 to one that generated more than $100 million in sales in 2008. The strategy involved bringing in a CFO to implement cost controls, adding staff to sell the company’s services to hospitals and other health care providers, and adding more reprocessing machines to the company’s plants. Vanguard, which already had a plant in Florida, also gained scale with the merger with Alliance Medical, which had a plant in Phoenix. Ascent Healthcare today provides services to 1,800 hospitals.

RoundTable Healthcare was not actively shopping the company when executives from Stryker Corp. approached them about a deal about three months ago, Knight said.

The sale of Ascent Healthcare marks the handsomest exit yet for RoundTable Healthcare, which previously exited three of the seven companies it bought with its first fund, a $400 million pool it raised in 2001. So far that fund has performed well, with each of the other three exits generating at least 5x the firm’s invested capital, Knight said.

The firm is investing out of its second fund, RoundTable Healthcare Partners II LP, a vintage-2005 vehicle that closed on $500 million. That fund is about 65 percent committed and will likely back two more platform investments, Knight said.

RoundTable Healthcare, which manages $1.1 billion, also manages a $200 million junior debt fund.