ARCHIMED refinances Ad-Tech less than a year after purchase, returning more than a third of investment to shareholders
Over 20 percent organic growth, plus profit margin improvement, leads to better loan terms and a return of capital, all with no increase in leverage.
Private equity healthcare specialist ARCHIMED has arranged a refinancing for Ad-Tech Medical Instrument Corporation – a key investment of its MED II fund – after acquiring the company in November 2020 for a combination of debt and equity. JP Morgan Chase, which funded the debt used to acquire Ad-Tech, provided the refinancing. With improved terms and a lower interest charge than the original acquisition debt, the refinancing returns more than a third of Ad-Tech’s purchase price to MED II’s investors. AdTech management will also benefit from the refinancing, based on return hurdles in their equity-based incentive programs.
Founded in 1983 in Greater Milwaukee, Ad-Tech is the world leader in the development, manufacture and sale of patent-protected, minimally invasive brain electrodes. Ad-Tech’s devices provide brain mapping used in the diagnostics and treatment of a wide range of disorders, including epilepsy. The firm’s rapidly expanding product range feature field-leading ease of use and connectivity.
Since ARCHIMED acquired Ad-Tech and appointed its chairman and chief executive, Brian Smith, Ad-Tech’s revenues have increased more than 20 percent and its profit margin has risen by over 5 percentage points, leading to a 50 percent-plus increase in earnings before interest, taxes, depreciation and amortization. The rise in sales and earnings permitted a significant increase in debt with no impact on leverage (i.e. with no change in the ratio of net debt to EBITDA).
Ad-Tech’s refinancing follows a similar refinancing earlier this month as Toledo, Ohio-based NAMSA, another ARCHIMED portfolio company bought less than a year ago, and the world’s leading contract research organization for medical devices. In 12 months, Europe-headquartered ARCHIMED has built up its presence in the US through acquisitions like Ad-Tech and NAMSA and through expansion, opening a new 10-person office in New York City late last year.
“The fact that we’ve been able to return more than a third of investment to our investors in under a year is really thanks to Brian Smith and the innovative skills and timely execution of the entire Ad-Tech team,” says ARCHIMED partner Justin Bateman. “We expect another year of strong organic growth and increasing profitability at Ad-Tech.” Under Smith’s Chairmanship, Ad-Tech has combined accelerated product line expansion with more effective customer-centric sales and delivery. “ARCHIMED has helped us zero-in and develop the most promising products in our pipeline and brought us the connections we need to fully realize international sales goals, especially in Europe,” says Smith. “ARCHIMED is proving indispensable for consolidating industry leadership.” Ad-Tech sells its products to a rapidly growing list of customers in over 60 countries.
ARCHIMED’s MED II partners with growth companies in the European and North American small-cap healthcare sectors, buying majority stakes for €5 million to €30 million in association with existing owners and managers. ARCHIMED also manages MED I, currently ranked the best performing buyout fund at a global level for the 2014 vintage, according to Preqin data. MED I has distributed more than four times invested capital to limited partners and has a total return in excess of six times invested capital.