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Morgan Stanley, Coller lead Webster Equity continuation fund process

GP-led deals that shift assets out of older funds, giving managers more time to manage the investments, accounted for a large chunk of total volume in 2020.

Webster Equity successfully moved two assets out of its third fund and into a continuation vehicle for more time and capital to manage the investments, sources told Buyouts.

The deal is among several GP-led processes that moved through the increasingly busy secondary market since last year. GP-led deals that shift assets out of older funds, giving managers more time to manage the investments, accounted for a large chunk of total volume in 2020.

The Webster deal focused on BayMark Health Services and Pharmalogic, both of which Webster acquired through its third fund, which closed on $400 million in 2014.

Coller Capital and Morgan Stanley were lead buyers in the process, which also included a large group of syndicate investors, the source said. Total value of the transaction, including capital for follow-on investments, totaled just over $1 billion, the source said.

Campbell Lutyens worked as secondary advisor on the process.

LPs in the third fund had the option to cash out of their interests in the pool or roll their stakes into the continuation pool. The majority of LPs chose to cash out, along with co-investors, the source said. LPs cashing out saw a return of about 6x their original investment, the source said.

BayMark is an opioid treatment company, while Pharmalogic is a specialty nuclear pharmacy business. No one from Webster Capital or Morgan Stanley returned comment requests Friday, while a Coller Capital spokesperson declined to comment.

Webster is in market with its fifth fund targeting up to $1 billion, PE Hub reported. Fund V will be Webster’s first targeting only healthcare, the story said. The firm, formed in 2003, is led by managing partner David Malm and co-managing partner Donald Steiner.

Steiner reduced his ownership interest in Webster Equity to 22.7 percent with the launch of Webster Equity Partners V, while Malm’s ownership interest increased to 77.3 percent, according to the firm’s Form ADV as of March.

Steiner made a charitable gift of his ownership interest in Webster Equity to Boston Foundation LLC in March 2021 but retained certain contractual approval and consent rights with respect to the firm’s third and fourth funds, the Form ADV said.

Other GP-led deals this year include Leonard Green, which completed a transaction to move four assets out of its 2007 fund and into a continuation pool, Buyouts previously reported. The deal, led by AlpInvest Partners and HarbourVest Partners, totaled around $2.5 billion.

Total secondary volume came in around $60 billion last year, with GP-led deals and direct secondary deals representing about 43 percent of total volume, according to Campbell Lutyens’ annual secondary volume report.