Originally Published by Orthopedics This Week Inc.

Robin Young • Monday, August 15th, 2016

Legendary private investment firm The Stephens Group, LLC announced in July that it had made a significant investment in a private spinal implant manufacturer. The Stephens Group is the second major private firm this year (after Kohlberg and Company) to make the leap into the spinal implant and instrumentation business.

The company The Stephens Group is investing in is a St. Louis spinal implant manufacturer named CoreLink, LLC.

Private equity has played a key role in funding such successful young spinal implant companies as K2M, LDR, and Globus Medical over the past few years. This year, two of the most famous and successful private equity firms have decided to also invest in the back pain conundrum. First Kohlberg and Company and now The Stephens Group.

The Stephens Group has invested in more than 200 companies over its history including such great American success stories as Wal-Mart, Tyson Foods, Alltel and HCA hospitals. That investment track record is why The Stephens Group is so famous.

Which begs the question.

What did the investors at The Stephens Group see in CoreLink?

CoreLink, which was founded in 2007, has about 90 employees and is a vertically integrated designer, manufacturer and distributor of spinal implants and related instrumentation.

The founder and CEO is 44-year-old Jay Bartling who, along with his team of engineers, surgeons and other customers have developed a line of innovative, high quality implants and instrumentation for a wide variety of spinal disorders.

The company manufactures and distributes spinal implant systems for posterior fixation from the occiput to ilium, a wide range of interbody products for ACDF, LLIF, TLIF, and PLIF procedures, minimally invasive platform technologies, anterior cervical and lumbar plating, as well as a new minimally invasive system to address sacroiliac joint diseases and trauma.

In total, CoreLink has a portfolio of spinal implant systems which cover approximately 75% of spinal implant procedures.

CoreLink’s overall strategy is to build a vertically integrated design, manufacturing and sales operation which emphasizes quality, cost control, and production efficiencies.

When he founded the company in 2007, Bartling’s vision was to develop a higher quality, more intuitive and stable technology spinal implant systems which he could provide to surgeons at an enhanced value.

Over the next few years, Bartling and his team developed and expanded on that vision but, importantly, in a controlled, organic way and were able to fund that growth from its own profitability.

For a spine company CoreLink is surprisingly vertically integrated with all aspects of development (engineering, prototyping, testing, etc.) and production (from raw bar stock to finished implant including most special processes like anodizing, etching, etc.) performed in-house. More than 97% of CoreLink’s products are self-manufactured, including some of the highest quality instruments on the market.

CoreLink’s 2016 Product Portfolio
• 3 Pedicle Screw Systems – Tiger® Thoracolumbar, Tiger® MIS, Tiger® Poly-axial Posted
• Anodyne® and Anodyne Single Cervical Plating Systems
• Tiger® Occipital-Cervical-Thoracic Fixation System
• Tiger® Sacroiliac Fixation System
• Tiger® Deformity and Osteotomy System
• Entasis™ Sacroiliac Joint Fusion System
• CL5™ Cervical, TLIF, Oblique, ALIF and Lateral Interbody Systems
• Zou® Anterior Lumbar Plating System
• F3D Titanium Interbody System (Pending 510-K Approval)
• Terrace Cervical Plating System (Pending 510-K Approval)
• Surgical Accessories – Pins, Bits, Drills, etc.

The Stephens Group Investment
When we asked CEO Bartling about The Stephens Group investment he told us: “I wasn’t actively seeking a significant investment like this. The company was and is doing great. However, there have been a few opportunities in the last couple years, including a couple acquisitions, which we explored but ultimately didn’t pursue because either I couldn’t act fast or credibly enough as an entrepreneur-owned business or the capital required would have stretched us beyond our comfort zone.”

“Through those experiences, I came to believe that having a partner with more financial resources could allow us to better achieve our goals. The issue was finding the right partner. I wasn’t particularly interested in working with a traditional private equity fund with fixed time horizons and other limitations. What I found in The Stephens Group is a team with a long history of providing patient capital to entrepreneurs to build world-class businesses, integrity, and importantly, who shares our vision for what CoreLink can become and is committed to helping us achieve it.”

Bartling went on to say: “This is a very positive event for all the stakeholders (employees, customers, suppliers, distributors, independent reps, etc.) of CoreLink. We’ve done a very good job of growing the business, and now this additional capital and other resources will allow us to further expand product development, engineering, manufacturing capacity and sales resources. Employees will see continued growth and investment in the business.”

And how will customers or distributors see the impact of this new investment?

“Customers will benefit from CoreLink continuing to design and develop products that improve patient outcomes. Suppliers will see increased volume. Distributors and our rep network will see new product launches and additional manufacturing capacity to support demand. Hospitals and surgeons will see a comprehensive product portfolio with excellent support and flexibility.”

“I want to repeat and stress that nothing, at least nothing negative, is changing as a result of this investment. It will be the same management leadership, same employees, same strategy, same location, same high quality products and flexible and responsive customer service. We just have significant additional capital and other resources to help grow faster and serve our customers even better.”

The Stephens Group
Three members of The Stephens Group will be joining CoreLink’s board of directors: Managing Directors Clay Hunter and Jim Jacoby and Vice President Grant Jones.

The Stephens Group is one of America’s great investment firms.

In the post-world war II era Stephens became the private capital engine behind such quintessential American success stories as Wal-Mart, Alltel, Tyson Foods, Arkla and HCA Hospitals.

In 1933, W.R. (Witt) Stephens founded Stephens Inc. to trade and invest in Arkansas Highway bonds, which were then selling as low as ten cents on the dollar. He had been encouraged by his father, A.J. Stephens, who insisted that Arkansas would eventually make good on the bonds. By the time the bonds paid off at par in the early ‘40s, Stephens Inc. had gained a reputation for both municipal bond expertise and providing sound financial counseling.

Witt’s brother Jack Stephens joined Stephens Inc. in 1946 and would later serve as Chairman and CEO from 1956 to 1986. Along the way, Witt and Jack invested in numerous businesses together through the family’s holding company, now known as SF Holding Corp.

The family’s investment portfolio continued to grow after Witt Sr.’s children, Witt Stephens, Jr. and Elizabeth S. Campbell, assumed active roles in the family firm in 1991 and 1981, respectively. In 2006, Witt Jr. and Elizabeth sold their interest in Stephens Inc., the investment bank and established The Stephens Group, LLC, to focus on principal investing.

Since its founding, the Stephens family has partnered with more than 200 businesses and some of those partnerships have lasted for over 60 years. The common value which The Stephens Group endeavors to bring to every investment is a partnership founded on mutual personal respect.

One catch phrase which many who’ve known and worked with The Stephens Group over the years have heard is that Stephens always bets on the jockey, not the horse. And it is looking for a good 30-year investment. As Jon Jacoby, former Vice Chairman and Senior Managing Director of The Stephens Group once said, “We’re basically long-term investors. The best investments are the ones you never have to sell.”

The most important consideration for Stephens, in other words, is people.

Finally, as CoreLink has found out, The Stephens Group shares the risk with its manager-partners, they are very patient and they align their financial interests and strategy with the strategy of the company. In other words, Stephens does not make money through fees, enhanced interest or financial engineering. They make money by building businesses.

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