The Scooter Store: Big and about to get bigger
The Scooter Store announced in February that it has received financing from an affiliate of Sun Capital Partners to fuel growth and acquisitions. Here's what Mike Pfister, The Scooter Store's executive vice president of government relations and external affairs, told HME News about why wheelchair providers are knocking on the doors of private equity firms and how that will change the shape of the market.
HME News: The Scooter Store is a big, successful company. Why does it need outside investment?
Mike Pfister: Our primary objective, last summer, when we started this process, was to help us transition through the rental change. We were not in a cash position to absorb the transition at our current business levels. We could have scaled back to survive it, but we couldn't have maintained our course. As we better understood their interest in our company, however, we realized that they could bring more to the table than money and a good interest rate.
hme: What was that?
Pfister: They see the same trends in health care that we do--the consolidation that you have when you have an industry going through what our industry has been going through in the last decade. That creates opportunity. The best example of that is competitive bidding. That is going to turn what has been a fairly mature industry upside down and there are going to be some new models that fall out. We're eager to be part of that. Somehow the country's health costs have to be lower and the status quo isn't going to do that. There are going to have to be some changes and these guys were just as interested in playing that game.
hme: The Scooter Store has expanded into different product categories in recent years, like traditional HME and complex rehab. Where is it looking to grow?
Pfister: I think our core growth will be with power mobility devices. As competitive bidding and the rental change run off suppliers, there are going to be more opportunities for us to service more beneficiaries, because there will be fewer choices for them to pick from. And it costs money to be bigger. So even in our core space, you have to have more working capital to do more business, especially in a rental model.
hme: How involved will the Sun Capital affiliate be?
Pfister: They're a minority partner with board involvement. Our management team is intact. They were satisfied and eager to work with the existing management team, so there are no surprises on the horizon there.
hme: How do you explain this trend of providers looking to private equity firms for investment and financing?
Pfister: The first thing is the environment, since 2005, hasn't been conducive to building a cash position to get through this rental transition and grow. The second thing is there are major economic driven changes coming down the pike. Fund managers see the opportunity inherent with that. There are going to be some disruptions, but fund managers like dynamic marketplaces because they create opportunities.
hme: What will be the impact of having these private equity firms involved?
Pfister: For our company, the primary impact, at least in the first year, will be the increasing levels of accountability that we'll have to these investors. It's going to be much more in line with the way a publicly traded company operates--the levels of transparency and operational reviews--which is different. I don't see us restructuring the company or reorganizing or doing anything like that on the immediate horizon.