Healthcare Investments ‘Micro’ in Name Only

Investors should not mistake Shore Capital Partners’ focus on microcap healthcare investments as a penchant for small plans. In fact, the firm’s strategy includes some big, highly acquisitive goals.

The Chicago-based firm recently announced it had completed a deal to buy Summit Medical, Inc., a medical device manufacturer for microsurgery products that has been in business for more than 30 years. The Summit deal represents the second platform investment from Shore’s Fund I, a $112.5M vehicle raised in May 2014, and according to Don Pierce, a partner in the firm, an add-on acquisition is already in the works and will be announced “very soon.”

Summit represented an ideal opportunity for Shore, given the portfolio company’s founder/owner was in the process of transitioning out of the business. Shore’s plans for Summit include enhancing the current management team—which will remain in place—with a board of directors to help guide the company. Summit’s current president and chief financial officer will continue to lead the portfolio company as it enters its new growth stage.

“We think there are niches in the healthcare space that [are poised] to do very well, but can benefit from more-experienced advisers as a growing business,” Pierce explains.

One of those niche plays includes minimally invasive surgery, Pierce says. The subsector continues to grow by reducing the sizes of wounds, recovery times, and the risk of infections. Shore especially liked Summit’s positioning within this space. The portfolio company’s products include an instrument-protection line for infection control and sterilization in the critical-care market. The company also makes ear, nose, and throat (ENT) products, as well as a variety of other surgical wares.

Shore will use Summit as a platform investment to build out a larger company within the smaller end of the middle market, Pierce says. Shore’s plans for the company include creating a leading microsurgery platform by expanding into additional markets. The firm will continue to look at service-oriented medical products companies, including the minimally invasive surgery space, as well as ENT, hospital, and other alternative sites for possible add-on acquisitions. As part of the transaction, Shore successfully obtained new credit lines for Summit to facilitate growth opportunities.

As the second platform investment from Fund I, Shore is moving according to plan. Pierce explains that the firm’s goals include making three or four platform investments annually.

“This [deal] fits very well with our strategy in the health microcap space,” Pierce says. “We are right on schedule.”