NY Shop Eyes Strong Fund Close Despite Co-Founder’s Departure – Exclusive

Firm: Enhanced Equity Fund LP

Fund: Enhanced Equity Fund II LP

Target: $300 million

Placement Agent: None

Executives at Enhanced Equity Fund expect to close their second fund at its hard-cap by the end of June, a source familiar with the effort told Buyouts. The optimistic outlook comes despite the departure of one of firm’s two founders, which resulted in the narrowing of its investment strategy.

The New York-based firm will likely close the Fund II with $375 million in commitments. However, the vehicle will focus solely on health care services targets, while the firm’s previous fund, a $225 million pool of capital raised in 2006, also had a mandate to invest in information and business services. That’s because Dave Howe, a co-founder of the firm, left last summer, our source said. He is in the process of buying one of the firm’s portfolio companies, our source said, adding that the departure was amicable.

Howe, a former partner at Citicorp Venture Capital Ltd. and Lightyear Capital LLC, founded Enhanced Equity in 2005 alongside Andy Paul, a former managing general partner at health care-focused Welsh Carson Anderson & Stowe, where he served from 1984 to 2000. Howe headed up the information and business services side, while Paul oversaw, and will continue to lead, investments in health care services. The firm now has nine investment professionals.

Enhanced Equity started raising the Fund II just after Labor Day last year, and did not employ a placement agent. More than 20 investors agreed to commit to the fund, our source said. The firm typically invests $10 million to $40 million of equity in buyouts or growth equity investments with enterprise values of between $20 million and $100 million.

The firm’s portfolio includes Correctional Healthcare management, an Englewood, Calif.-based provider of health care services to inmates in county jails in the Southwest; Fitness Together, a Highlands Ranch, Colo.-based home health nursing company; and PrePak Systems Inc., a Cookeville, Tenn.-based company that repackages bulk pharmaceuticals into bottles, blister packs and individually packaged doses for government mail outpatient pharmacies and hospitals.