Outsourced Medical Device Services: Prescott’s Demonstrates Market Opportunity

From biomedical equipment to various imaging modalities to examination tables, each piece of healthcare equipment requires rigorous maintenance to perform its intended function safely and effectively. That essential job increasingly falls to a large and fragmented universe of independent service organizations (ISOs).

The sector continues to command a high level of interest from investors due to its large addressable market, the recurring nature of its offerings, and the strong value proposition offered by companies across the outsourced medical device services landscape.

Here, senior professionals from our Healthcare & Life Sciences Group discuss what makes outsourced medical device services appealing to investors, our advice for buyers and sellers active in the space, and the differentiating traits of our recent client Prescott’s.

An Ongoing Need for Maintenance and Repair

The outsourced medical device services market is expanding rapidly as healthcare organizations increasingly recognize the value proposition of ISOs that deliver high-quality maintenance and repair solutions to mission-critical equipment. In addition, ISOs are crucial to extending the useful life of a healthcare provider’s asset base.

Tyler Bradshaw, a managing director, expects medical procedure volumes to continue to rise and the entire sector to experience solid growth due to well-established, long-term tailwinds: an aging population, greater incidence of chronic health conditions, and greater access to healthcare, to name a few.

“Each healthcare setting is expanding its base of medical devices and equipment, all of which require the same rigorous, high-quality servicing,” he says. “These forces will continue to drive equipment utilization and demand for related maintenance solutions, signaling significant upside for outsourced medical device services providers.”

To view our market map of actionable opportunities across outsourced medical device services, contact our senior professionals at MedicalProductsandDevicesTeam@harriswilliams.com.

Unlocking Future Value: What Investors Should Prioritize

Within outsourced medical device services, ISOs are outgrowing the service arms of incumbent original equipment manufacturers (OEMs). That’s because ISOs are typically faster, more cost-effective, and better able to provide hospitals with solutions across OEM brands, which enables hospital supply chains to rationalize vendors.

The ISO landscape is also highly fragmented, providing plenty of consolidation opportunities to create scaled platforms and benefit from multiple arbitrage. “There have been several recent high-profile transactions that show the value-creation potential in this sector and will likely encourage additional companies to enter the market,” says Bradshaw.

Top-performing service platforms have an unwavering focus on customer satisfaction, providing high-quality service and meeting all their customers’ needs, which drives strong customer retention. To do this, companies must own the customer relationship and offer the technology and information support their customers need to grow their businesses.

In addition, acquisitions offer an attractive growth path in this market, as they allow a company to take advantage of both market fragmentation and adjacent market opportunities. “Best-in-class platforms have well-developed and refined M&A strategies,” adds Bradshaw. “The ability to successfully integrate acquisitions, not just aggregate assets, is an important differentiator and value driver for companies in this sector, and a principal consideration for investors.”

Prescott’s: Capitalizing on a Range of Modalities

Harris Williams advised Prescott’s, a leading healthcare-focused, specialty, outsourced clinical engineering services provider, on the company’s sale to Morgan Stanley Capital Partners.

Prescott’s provides medical equipment repair and maintenance solutions, as well as refurbished equipment and parts sales and rentals, for critical surgical suite modalities like microscopes, infusion pumps, patient monitors, anesthesia machines, and sterilizers. Its timely repair and maintenance services enable continuity of care and help healthcare providers avoid costly equipment downtime.

“With strong customer relationships and an international footprint of technicians, Prescott’s is well positioned to meet growing demand for the servicing of a wide range of critical biomedical equipment and refurbished devices,” says Bradshaw.

Rising Demand, High Fragmentation

Secular tailwinds within healthcare will continue to drive greater demand for outsourced medical device services and growth across the highly fragmented landscape. The companies best positioned to capitalize on the sector's value-creation opportunities are ISOs offering efficiency, cost effectiveness, high customer retention, and strong M&A capabilities.

To further discuss the M&A potential within outsourced medical device services, please contact our senior professionals.