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Independent sponsor Hughes & Company raises most of $100m inaugural fund

The fund has already made its first investment and has a robust pipeline moving forward.

After a decade as an independent sponsor, signs point to Hughes & Company making strides in its transition to full-blown private equity firm.

It has raised almost 90 percent of its first growth equity fund and already closed its first deal, a source with knowledge of the situation told Buyouts.

A big chunk of capital came from State of Wisconsin Investment Board, which committed $50 million to Hughes Growth Equity Fund I in the fourth quarter of 2020, according to documents from its March 17 meeting obtained by Buyouts.

Hughes & Company focuses exclusively on lower mid-market healthcare software and technology-enabled service companies, according to its website. It does both minority and control transactions. In addition to growth equity, it also does leveraged buyouts, spin-outs and strategic combinations. Its equity investments range between $5 million and $30 million, the source told Buyouts.

A Form D filed last fall said the fund was targeting $100 million and had raised $65 million as of October 29.

The vehicle has already called down more than $20 million of that to make the fund’s first investment, the source said, leading a merger between Azara Healthcare and SPH Analytics’ population health division that closed in December. Now, the fund has raised “north of $90 million,” and may very well break through its target. It has no hard-cap.

The firm plans four to six portfolio companies for this fund and has a robust pipeline. It could start raising Fund II in 12 to 24 months. That vehicle would not be much bigger than the first, though, as the firm is focusing on “measured growth.”

Before raising its first fund, Hughes & Company operated as a fundless sponsor, working with a group of institutional investors on a deal-by-deal basis. It made four deals and three add-ons. Three of its four platform companies have had liquidity events. They had a 3.8x gross multiple on capital and slightly less than a 93 percent gross internal rate of return, the source told Buyouts.

On March 9, Hughes & Company sold a stake in iN2L, a tech company that creates “content-driven engagement for seniors,” to Vista Equity Partners. However, Hughes will retain a small stake in the company, the source said.

The firm is led by managing partners Travis Hughes, James Denny, Ken Manning and Matthew Simas.

The firm was founded in 2010 by Hughes, who previously spent three years as a vice-president at software investor JMI Equity. He also had stints with Madrona Venture Group and Wind Point Partners, according to his LinkedIn profile. He received his MBA from Northwestern University’s Kellogg School of Management and his bachelor’s degree from the University of Notre Dame.

The rest of the firm’s leadership is made up of people with sector experience.

Denny worked with Hughes for “a dozen years,” the website said, but became “actively involved” with the firm in 2016. Before that, he was founder, president and chief executive officer of Navicure, which later became Waystar following its acquisition by Bain Capital.

His LinkedIn profile says he joined Hughes & Company as a managing partner in April 2020. He is also an advisor for private equity firm Madison Dearborn Partners and a board member of several health care companies.

Partner Ken Manning also joined the firm in April 2020. Like Denny, his background is in the healthcare industry. He was co-founder and chief operating officer of Curaspan Health Group, a software healthcare technology company, between 1999 and 2016. He has an MBA from Duke University’s Fuqua School of Business.

Simas joined the firm in 2017 but has worked with Hughes since 2012 and was active with the firm starting in 2015. He founded and ran MedInitiatives, Inc, a business intelligence and data analytics company. He also worked at SilverStream Capital, a family office focused on healthcare and technology investments, and did a stint as a project consultant for TPG from 2016 to 2019.

Partner and chief operating officer Mark Regal also joined the firm last year but has been working with Hughes for nearly a decade, according to the firm’s website. He previously worked for a Chicago-based single family office. The team is rounded out by partners Naile Kovuk and Rytas Vygantas and associate Chip Locke.

Hughes & Company declined to comment for this story.

Action Item: read more about Hughes & Company’s team here and about its investment strategy here.

Update: this article has been updated to clarify that Hughes & Company ran a merger between Azara Healthcare and SPH Analytics’ population health division.