As an investor, one of the challenges is finding industries that are growing rapidly enough to present opportunities. Statistics show that one attractive area for investment is the medical alert industry. Most of the companies in this industry are private, but those with smart management are making the most of their private funding rounds.

Wise investment

One prime example of this is Medical Guardian, which Health.com named as its best choice for medical alert systems. According to PitchBook, the company has had four financing rounds since it was founded in 2005.

Its latest deal was a private-equity growth funding round from Water Street earlier this year. Some big names have been involved in funding Medical Guardian over the years. For example, the company refinanced a $105 million credit facility with Apollo Capital Management in early 2020.

Background of the Water Street deal

Medical Guardian CEO Geoff Gross followed that credit refinancing deal with a growth investment from Water Street a year later. Water Street is a private-equity firm based in Chicago and focused entirely on the healthcare industry.

One thing that makes the Water Street investment so interesting is the fact that it was carried out amid a pandemic that was sweeping the globe. Additionally, Medical Guardian hadn't taken on an investment from a private-equity firm in any of its previous funding rounds.

According to PERS Insider, Gross didn't want to give up control of his business. Still, Imperial Capital's John Mack, who led Medical Guardian's debt refinancing deal, told Gross that selling some equity in the business would enable him to create a much bigger business and bring in some partners who could help him achieve his objectives.

Seeking a partner

Gross ended up deciding that taking on a private-equity partner made sense, as long as it was the right partner. Traditionally, PE firms take a controlling interest in the companies they invest in, but Gross didn't want to do that. Instead, Medical Guardian targeted a minority investment, and several PE firms put forth bids, enabling Gross and Mack to look at the terms and conditions of each one.

Medical Guardian selected Water Street to partner with because it is one of the leading healthcare-focused PE firms in the country. Its track record in various healthcare services and businesses was strong, and Gross felt the firm would add the most value to his team.

Water Street had been interested in the medical alert device industry since as early as 2010, but the firm was holding out for the right partner before it would invest.

What Medical Guardian used the money for

Water Street executive Kelly Zitlow told PERS Insider that they had been doing a lot of research and meeting with various companies in the medical alert device space. However, when they met with Medical Guardian, they were immediately impressed with its growth trajectory, which resulted from its innovative products and strong management team.

Water Street partnered with Medical Guardian on three main initiatives. The first was to keep expanding in its core markets in which seniors and their loved ones choose their own medical alert devices. The second is to expand into the healthcare market, where medical alert devices can be bundled with other health services. The third is to develop new technologies and integrations for the devices in the connected healthcare ecosystem.

With the funding from Water Street, Medical Guardian has the freedom to pursue strategic acquisitions, partners and other growth initiatives.

Why investing in the medical alert device industry is a smart move

It's no secret that high-net-worth individuals have been turning to the private markets more and more often in search of returns. Private equity firms like Water Street enable investors to get a slice of the private investment market while targeting a particular industry like healthcare.

The medical alert device industry makes a particularly good investment right now, and here's why. COVID has served as a major catalyst for the healthcare industry, especially the medical alert device sector. The pandemic has accelerated the adoption of certain kinds of technology, including medical alert devices.

Mack told PERS Insider that pretty much every player in the industry has seen revenue growth due in part to the pandemic. More and more seniors wish to stay in their homes as they age, and medical alert devices enable them to do so. Those who have had COVID may experience long-lasting after-effects of the virus, so it makes sense for such patients to invest in a medical alert device.

Additionally, the U.S. Census Bureau reports that all Baby Boomers will be age 65 and older by 2023, further increasing the size of the total addressable market within the next few years. The combination of a growing number of seniors and the trend of seniors choosing to age at home instead of in a facility presents ample opportunity for investment.

There are many opportunities for investment in the medical alert industry. Investors with an eye for the private-equity market may want to seek out healthcare-focused PE firms with a goal of investing in medical alert companies.

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