Platinum Equity Acquisition of Sunrise Medical Recognizes 'Important' German Market

(Questions and answers have been edited for length and clarity). 

Q: It’s the firm’s first platform deal in Germany since 2004. Is that significant?

Samson: It’s a very large, important M&A market in Europe. We had tried for a long time , but the stars hadn’t aligned before. We’re very proud to do a deal in Germany and hope to do a lot more.

Q: Why did Platinum do this deal? 

Samson: We bought it to grow, it’s a really a ‘buy and build.’ Part of that is they have a meaningful investment in the U.S. and are intending to grow their presence in the U.S. We like the management team a lot, they’ve done good work and think they’ll be good partners. It’s also generally a non-cyclical business that is uncorrelated to GDP or business cycles, which is attractive.

Chacartegui: This is a market that presents noncyclical, structural growth because of the population aging. The replacements for these types of products, which about 85% of the sales are related to replacements, happen every three to five years for a patient. It’s fairly recurrent. Importantly, this business is diversified across customers, countries, and products.

 Q: How was this deal sourced? 

Chacartegui: This was originally a process in 2023 that got aborted. It was bad market timing from a financing perspective, from a buyer/seller type of gap perspective, and the risk appetite.  

We reengaged. We followed the company throughout that period, saw it was performing according to the management targets, and that ultimately there was a preference by the seller to do this under a quieter process. By the time we signed, we had followed this business for a year and a half.  

Q: What was going on in the markets in 2023? 

Chacartegui: You’re in the midst of interest rates still going up, not having visibility as to when those were going to stabilize, and people were waiting on the sidelines from a financing market perspective. But from an investment perspective, you’re waiting to see when it was all going to stabilize.  

Q: Describe how Platinum developed a relationship with the seller. 

Chacartegui: We really developed a strong relationship with the management team. The CEO (Thomas Babacan), who comes more from an industrial background, had a real appreciation for our operational capability. He was hired by Nordic Capital to evolve the business.  

He is very sophisticated from an operational point of view. He appreciated our approach, our resources, and was looking for somebody that could act as a partner to him to keep evolving the business.  

Samson: We did the work, which earned us the right to be somebody they wanted to stay in touch with. We were a steady hand. We were disciplined, we were open, we were open-minded, too. We are also willing to adjust when things change.

Q: From an ops perspective, what will be the major focus? 

Samson: This is really an M&A-focused investment thesis and our ability to source add-on opportunities and then bring our suite of operations resources to help with integration and synergies is useful. The company has potential to keep expanding its footprint in the U.S. and I think as a global firm with potent teams on both sides of the pond in Europe and the US, we were a perfect fit.

Chacartegui: The focus is going to be on supporting this strong management team and accelerating the initiatives they already identified but haven’t always had fully-fledged solutions for. Around manufacturing footprint optimization, there is regional consolidation of plants, but there’s also capacity shifts. So, there will be a focus on productivity measures around existing facilities, procurement, and then IT platforms standardization.

They have a track record of having done a dozen acquisitions in the last 10 years, mostly relatively small. We’ll look at someone a little bigger, so it has a different level of complexity. When you couple that with these manufacturing footprint initiatives that are happening, the management team is going to be stretched, and that’s why they’ll really appreciate a firm like us.  

Q: What is Sunrise Medical Group’s potential? 

Chacartegui: The business has made some material investments in its powered wheelchair portfolio. It has transformed it’s positioning in North America with a complete revamp of the management team and the manufacturing footprint. All of that will help the company gain more share in the North America market. 

In the last fiscal year, they grew double digits in the U.S. It’s got potential to keep doing that and to accelerate this organic growth based on some key market positions they have. We think we can expand margins because of the operational improvements that we’ll help the company with. Through M&A, we expect to boost scale and diversification, which is always very important. And when you couple scale, growth, and market – and do it well – you’d anticipate a valuation profile improvement at exit.