By Maureen Flanagan
CIVCO Medical Instruments Company was founded in 1981 by Dr. Vick Wedel, a sonographer and professor at the University of Iowa. The company, based in Kalona, Iowa, designs, manufactures and markets accessories and positioning systems for use in ultrasound imaging and other minimally invasive surgical (MIS) procedures.
CIVCO's products have proved critical to the smooth operation of ultrasound systems and have made the company a global leader in its markets. As such, CIVCO partners with the world's top international medical equipment manufacturers such as Philips, General Electric, Siemens, and Toshiba. It also sells its products to over 6,500 hospitals and clinics in the United States and through distributors worldwide. CIVCO's history of innovation, growth and profitability provide the company with outstanding prospects for future growth.
On July 18, American Capital invested $15 million in CIVCO Holdings ("CIVCO"), a company formed by KRG Capital Partners LLC to take private Colorado MEDTech ("CMED") (Nasdaq: CMED). American Capital's investment takes the form of senior subordinated debt with warrants, redeemable preferred stock and common stock. Madison Capital Funding (an affiliate of New York Life Investment Management) and Merrill Lynch Capital provided a revolving credit facility and a senior term loan to help finance the acquisition.
The company joins American Capital's portfolio of more than 75 middle-market companies and investments of approximately $1.8 billion. CIVCO marks the sixth investment American Capital has made with KRG Capital. The five prior transactions include Atlantech, Case Logic, FMI, Trinity and TransCore.
For more information about American Capital's portfolio click here.
"American Capital is supporting the continued success of a strong company that has risen to its market leadership position through unparalleled performance in working closely with ultrasound OEMs," said American Capital Principal and Managing Director Darin Winn. "CIVCO works with OEMs from the early R&D stage through and beyond product launch, ensuring that their equipment is as versatile as it can be, while providing the OEM customer base with the highest level of service. Competing in a highly fragmented industry, CIVCO has successfully differentiated itself as the OEM partner of choice with its premium quality products, delivery performance, extensive global distribution network, global regulatory compliance, complete product line, and superior customer service. CIVCO is well-positioned to meet the industry's growth demands driven by exciting developments in ultrasound imaging technology, while leveraging its relationships with global OEMs to expand its product line into other imaging modalities."
CIVCO's products, most of which are disposable or consumable, are manufactured for the installed base of ultrasound equipment. They also accompany new equipment manufactured by OEMs in the form of "starter kits" that include transducer (ultrasound probe) covers, surgical covers, biopsy needle guides, and a complete line of supplies, such as print media, monitors, gel, etc., along with a catalogue of CIVCO supplies. Pictured at left is a needle guidance system which attaches to the ultrasound transducer, providing a fixed angle for inserting various needles and instruments.
Dr. Wedel, the company's founder, is well known for his invention of a biopsy needle guide. In 1996, Dr. Wedel hired Klasson to lead the company. As president, Klasson has been instrumental in transitioning the business to focus on its strategic relationships with OEMs. Though the attachments and accessories that interface between the equipment, physician and patient are critical to an ultrasound equipment's design, OEMs typically outsource this part of the operation to a reliable partner.
Under Klasson's tenure, CIVCO has taken on the ultrasound supplies businesses of nearly every large OEM. Moreover, it is the only company with strategic OEM relationships that extend from the preliminary R&D stage through aftermarket supply of accessories and include collaborative sales programs and ultrasound OEM referrals.
As it continues to pursue and expand its OEM business, the company has made several recent strategic acquisitions to augment its products, customer base, and capabilities. In December 2000, CIVCO acquired the assets of the ultrasound and supplies business of Philips Medical Systems. This acquisition added more than 150 products to the company's line, increased CIVCO's presence in the supply business, and provided long-term manufacturing and distribution of Philips' custom products. In February 2002, CIVCO acquired Barzell-Whitmore Maroon-Bells, Inc. (B-W). With over 38 patented products, B-W designs and manufactures proprietary positioning and stabilizing devices as well as disposable accessories used in MIS procedures. This acquisition brought a unique clinical perspective to the company's R&D activities.
As the business has grown, the company has expanded its facilities and redesigned the production flow to support the additional product lines and sales growth, while increasing efficiency. CIVCO's superior and unique manufacturing capabilities enable the company to take advantage of a wide variety of market opportunities and increases its time-to-market advantage over competitors.
The global market for diagnostic ultrasound equipment is expected to grow 10% a year to $4 billion by 2006. In the past few years, rapid advances in ultrasound technology has increased its use in a number of medical procedures, particularly in the fast growing MIS segment. In MIS procedures, conversion to ultrasound from more traditional CT, MRI, or x-ray has been driven by advances such as 3D and 4D ultrasound imaging. Ultrasound is now routinely used for biopsy procedures, offering more compact and lower cost equipment (a handheld model is now available). With its widespread availability and greater affordability, ultrasound has increasingly become the imaging modality of choice both domestically and internationally. It also provides the most cost-effective imaging modality for developing countries seeking to improve the quality of their healthcare services.
As the ultrasound equipment market grows, OEMs are outsourcing the sales and distribution of accessories -- and in the case of CIVCO, the design of the ultrasound accessories as well. Furthermore, OEMs look to accessory manufacturers for a full range of services including regulatory compliance for manufactured accessories and rapid delivery turn-around. These requirements make it increasingly difficult for smaller companies to compete.
Leveraging the strength of its OEM network, CIVCO is well positioned for future opportunities. The company anticipates a growing market for its equipment covers, image guided biopsy systems and ultrasound supplies. Its imaging equipment positioning systems - a market growing at a robust 25-30% a year - will also likely be in demand. New medical procedures, such as the saturation biopsy technique for prostate procedures now being marketed by Drs. Barzell and Whitmore, are expected to expand their use even more.
As the number one provider of imaging equipment accessories, CIVCO is realizing its image of a bright future.
