Bain Capital Private Equity scoops up medtech supply chain firm PartsSource

Bain Capital is eyeing opportunities in the ongoing digitization of healthcare with its recent acquisition of medical equipment parts and services company PartsSource.

Bain Capital Private Equity purchased the supplier from Great Hill Partners in a deal that values the company at about $1.25 billion, according to people familiar with the matter, The Wall Street Journal reported.

The companies did not disclose financial terms of the deal.

Bain Capital's experience in healthcare and healthcare IT investments include Waystar, Zelis, HST Pathways, IQVIA, Kestra Medical Technologies and Grupo Notre Dame Intermedica.

The company's investments in healthcare providers such as HCA Healthcare, Aveanna Healthcare and Surgery Partners offered insights into the challenges that providers face, Devin O’Reilly, a managing director at Bain Capital Private Equity told Fierce Healthcare.

"We see both the challenges and opportunities to help health systems optimize their business, whether that’s assets they have or making sure med-tech equipment is up and running and functioning so they can provide care for patients," he said.

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PartsSource operates an online marketplace for medical equipment maintenance parts and services, almost like an "Amazon of Healthcare," with a website that connects hospitals and medical clinics with vendors and repair professionals to find replacement equipment, parts and services. 

The company's cloud software and marketplace technology tools help hospitals source on-demand parts and services. 

Last year, PartsSource expanded its marketplace network from parts into on-site and off-site repair and service solutions.

PartsSource’s marketplace connects more than 3,500 hospitals and 15,000 clinics, with more than 8,000 Medtech OEMs and repair professionals across the country. Clients include Community Health Systems, Johns Hopkins Medicine, Cleveland Clinic, Mayo Clinic Health System and New York-Presbyterian. 

Started in 2001, PartsSource is based near Cleveland. Following Bain Capital’s investment, the business will remain under current management led by Philip Settimi as president and chief executive.

The investment will help PartsSource continue to accelerate its growth trajectory, broaden its solutions portfolio, and expand its marketplace platform, according to the companies.

As a physician by training, Settimi joined PartsSource in 2014 understanding the value of using technology to improve the hospital supply chain.

"I know from my time as a clinician, you're sitting in an operating room or clinical environment, waiting for clinical equipment to be ready at the pace we wanted to deliver clinical care," he told Fierce Healthcare.

PartsSource was founded on the idea that an evidence-based, digital approach to the healthcare supply chain can unlock better healthcare delivery, lower costs, and enhance clinical outcomes, he said.

Hospitals and clinics manage a diverse supply chain of medical device and equipment suppliers, he said. "Most of our clients are managing 500 to 1,000 vendors to support that equipment and service requests. The folks who are managing this are well-intended and underpowered. The problem is a people, process and technology one. We don't just build software and deliver it and we don't just deliver analytics; we help them buy more cost-effectively and it really improves cost, quality and productivity of the teams."

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Bain Capital has a track record for building leading healthcare technology companies and brings expertise and resources to bear to help PartsSource scale its business, Settimi said.

"We're focused on healthcare operations and bringing marketplace technologies into healthcare and this will help scale our business even faster. We were looking for something unique and rare and found it in each other," he said.

The company is experiencing rapid business momentum bringing three to four hospitals onto its software platform a week, according to Settimi.

PartsSource's revenue is growing by double digits, he said.

The COVID-19 pandemic caught the healthcare supply chain "flat-footed," underscoring the need for a more strategic approach to equipment procurement and that's also accelerating PartsSource's growth.

The company is poised for continued rapid expansion as providers shift their purchasing toward e-commerce and away from manual processes,” O’Reilly said.  

“We believe PartsSource has a clear runway for organic growth and a significant opportunity to broaden the platform and strengthen its offering to customers through strategic acquisitions, product innovation, and international expansion," he said.

The transaction is expected to close during the third quarter of 2021.

Robert W. Baird & Co. is acting as the financial advisor, and Goodwin Procter is serving as legal counsel to PartsSource. TripleTree, LLC is serving as financial advisor and Kirkland and Ellis LLP as legal counsel to Bain Capital Private Equity.