Deal Snapshot: Canadian Hospital Specialties

Canadian Hospital Specialties (CHS), a portfolio company of Cortec Group Fund V, is a leading manufacturer, marketer, and distributor of medical products to Canadian healthcare facilities. Harris Williams recently advised CHS on its sale to Flexpoint Ford, LLC.

In this Deal Snapshot, members of both our Healthcare & Life Sciences Group and Specialty Distribution Group discuss what continues to make specialty distribution assets interesting investment opportunities. They focus on why healthcare is a compelling distribution subsector and what made CHS an attractive investment. They also explore what other buyers should know about this space.

What is appealing to buyers about specialty distribution, especially in the healthcare industry?

Baltimore: Many areas of specialty distribution remain highly fragmented. On one end of the spectrum, a handful of big “box movers” compete on price and bring products to their customers without delivering any deeper value. On the opposite end, we see smaller niche players operate with geographic and product constraints. These companies often have deep expertise on a few products, but their size limits growth. They can’t distribute nationally or create their own proprietary products. This landscape creates opportunities for significant acquisition activity, often at highly accretive multiples.

Porter: The healthcare subsector has added potential, in large part because of its resilient, non-discretionary demand characteristics. Hospitals purchase a wide range of products in every economic environment, and the industry-wide move to disposable items just amplifies this need. Because specialty distribution in healthcare remains fragmented, companies with regional or national scale can build broad, lasting relationships with their customers.

What makes CHS a particularly attractive asset?

Gillam: CHS had a unique competitive position relative to larger and smaller distributors: national scale and a full suite of products combined with truly hands-on customer and vendor relationships. In addition, it was able to get ahead of—and drive—the shift in Canadian healthcare toward the use of more disposable products. CHS helped convert the market and then capitalized on the recurring demand that comes from this shift. In recent years, around 90% of CHS’s revenue has come from single-use products.

Porter: The team also focused on being true partners with their customers and vendors, and on delivering customized service. Its clinical sales force included approximately 70 people who were able to help healthcare providers and hospitals find the solutions they need. This support went beyond just delivering products. Not only could the team source hard-to-find items, but they also created proprietary kits that addressed customers’ specific clinical needs.

Gillam: The clinical sales team’s expertise is deep enough that they might be in the operating room, showing a surgeon how to use a new hip replacement or bronchoscope. If the surgeon has questions during the procedure, the CHS employee is able to answer them. That’s a different level of service and sophistication than you’ll find at either the small distributors or the global players who primarily compete on price. Because of this service focus, CHS has strong customer and vendor relationships that allow significantly higher margins than you’d expect from a typical distributor.

What should other prospective buyers know about this subsector?

Baltimore: Specialty distributors need to do more than look for and react to customer needs or try to beat competitors on price and volume. The most compelling companies innovate and help design solutions for their customers. This approach should extend to the opposite end of the value chain, as well: Specialty distributors should understand their vendors’ product-development needs and support them with collaborative, transparent relationships.

Gillam: When you combine that thoughtful support with a national or regional scale, you can service multiple locations and become the single vendor a customer needs. Specialty distributors who achieve that depth and breadth in any industry are likely to enjoy more lasting client relationships and create the potential for higher margins.

Going forward, we anticipate that long-term success will require more than the legacy buy-and-build playbook. Instead, we expect the most valuable specialty distributors to employ systems, processes, and technologies that accelerate growth and make life easier for customers.


Harris Williams' Specialty Distribution Group has experience across a variety of business models as well as end-markets. Our deep relationships with key financial and strategic buyers and understanding of the value chain enables us to provide superior outcomes for our clients.

Rapidly changing technologies and a constantly shifting regulatory environment are facts of life in the healthcare and life sciences marketplace. Our Healthcare & Life Sciences Group is dedicated to understanding these complex industry dynamics and providing superior merger and acquisition advisory services to companies that operate within it.

Published May 2021

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