Source: mergermarket, an online M&A news and analysis service that is part of the Financial Times Group. Visit www.mergermarket.com for more information.

Implantable Provider Group (IPG), a service provider in the medical device supply chain, predicts substantial growth for three to four years, after which it could attract strategic buyer interest, said Jay Ethridge, CEO.

The Alpharetta, Georgia company, majority-owned by Sequoia Capital since March 2010, is focused on building relationships with the large insurance companies that are its potential customers. IPG manages the delivery of implantable medical devices on behalf of large commercial and workers compensation payers, with the aim of providing a more cost effective, convenient purchasing process, versus the traditional process in which hospitals and surgery centers purchase surgical implants themselves.

While it has taken time to prove the merits of the new process, Ethridge contended IPG has now established actuarial evidence of the cost benefits, and the company has grown its revenue 78% over the past three years. IPG expects revenue of more than USD 30m this year, up from USD 19.6m last year. It expects growth to further accelerate, bringing annual revenue to a run rate of USD 150m to USD 200m by the end of 2015, the CEO predicted.

At that level, IPG should have sufficient scale to attract serious interest from strategic buyers, Ethridge said. Logical types of buyers for IPG will include large insurance companies, pharmacy benefits management companies, and specialty benefits management companies, he said. Asked about the major players in the specialty benefits category, Ethridge named CareCore National, Magellan Health Services and MedSolutions.

In the meantime, IPG will consider bolt-on acquisitions on an opportunistic basis, Ethridge said, reiterating that making buys is secondary to IPG's organic growth efforts. The company could take interest in acquisition targets that would add technology, expertise or capabilities, particularly related to the medical device supply chain and/or data capture. IPG does not expect to raise further outside capital, barring a notable acquisition opportunity that might require funding, the CEO said.

Sequoia Capital acquired IPG through a recapitalization in March 2010, in a deal that gave IPG a post-money valuation of USD 35m, Ethridge said. Prior to that, IPG's majority owner was Fulcrum Equity Partners, which had recapitalized the company in 2007.

IPG has not engaged investment bankers previously. Its long-term legal counsel is Nelson Mullins, which advised the company through its two recaps, the CEO said. The company also has a credit facility and an option for a term note associated with the facility through Silicon Valley Bank to fund working capital and growth capital needs, he said.

Adjacent to its core business model, IPG also is building a database of surgical implant usage information that it expects to hold substantial value for the medical device industry, Ethridge said. The company has not developed a specific plan yet on how to monetize the data.

By Chris Marr - Atlanta