One consequence of an improving economy is increased M&A activity. It's an indication that corporate operators and managers are no longer in a risk-averse mode. Given the recent strong growth, expectations of continued growth, and low rates, it's not surprising that many private equity companies have been particularly aggressive in recent months.
The latest and one of the largest private equity deals of this cycle was a consortium of private equity companies - Blackstone Group
About Medline
Since Medline is a private company, the exact terms of the deal are unknown, but the deal reportedly values the company at $30 billion. Medline said it would use the proceeds to increase the number of products it offers and expand its business internationally.
The company's management team will remain in place. Medline was founded by A.L. Mills in 1910, and the majority of its ownership remains within the family.
The Northfield, Illinois, company said it will continue to be led by the Mills family, who will remain its largest single shareholder. Its management team also will remain in place. Medline was founded in 1910 by A.L. Mills, and now distributes medical supplies to more than 125 countries, according to the company's website.
Outlook
The deal can give investors insight in two different sectors - private equity and the medical supply sector. It's not surprising that the private equity industry is one of the best-performing sectors since the March 2020 low. They are beneficiaries of low rates which makes their costs decline. Additionally, they have been investing in assets like real estate which have been heavily appreciating. Until, the business cycle turns lower, it's fair to expect continued outperformance.
Medical supply stocks are a group which outperforms on longer timeframes. Given the aging population and increasing spending on healthcare, these companies' revenues trends higher and is less sensitive to economic conditions. They also tend to have pricing power especially as buyers are not price sensitive.
