Colonnade publishes industry commentary on healthcare linen rental market.
The healthcare linen rental industry is attractive to private equity and strategic buyers. A recent flurry of M&A activity indicates continued inflows of capital to the sector and acquisition activity. The industry is fragmented, companies have predictable recurring cash flows at 10%-15% EBITDA margins and opportunities exist for margin enhancements in consolidation (or privatization) transactions.
The healthcare linen rental industry is estimated at $3 billion in annual revenue and includes the laundering of bed linens, towels, patient gowns, scrubs, medical apparel, reusable operating room linens and disposable linens that are used by hospitals, long term care facilities, clinics and surgical centers. According to the American Reusable Textile Association, 2% to 3% of a hospital’s budget is spent on laundry and linen services. Healthcare linen can be rented, owned, self-laundered or outsourced. An estimated 80% of hospitals and other large institutional linen users rent linen, while the other 20% own it, of which 8% of the total launder in-house.