The Carlyle Group’s Bob Dahl: More Than A Health-Conscious Investor –

For a guy whose introduction to health care was “pure happenstance,” Bob Dahl has certainly embraced the field in which he now invests. The managing director for The Carlyle Group in New York, who oversees the buyout firm’s health-care practice, is something of a walking endorsement for health care.

Each weekend morning he gets up and concocts his favorite food: a fruit smoothie. His favorite vacation involves the healthy environs of the Rocky Mountains, where he can pursue some of his favorite endeavors – skiing, hiking and golf.

Naturally, Dahl has tried out the products from his portfolio companies. One, in particular, is an invisible plastic retainer worn to straighten out teeth. He tested the product for nine months.

He speaks rather passionately about the teachings of Dr. Dean Ornish, whom he met a few years ago. Ornish, founder of the Preventive Medicine Research Institute, was the first to prove that heart disease is reversible by changing diet and lifestyle, one based on a low-fat diet, exercise and stress reduction.

Dahl’s passion for health care as a life practice spills over into his business life, where his doggedness for sourcing deals has earned The Carlyle group some winners. Dahl was Carlyle’s point man in the firm’s acquisition of Carter-Wallace’s health-care business, a deal that was named Middle-Market Deal of the Year by Buyouts for 2001. Dahl described it as the most complicated, convoluted deal on which he has ever worked.

Carter-Wallace, comprised of a specialties pharmaceuticals business and a consumer products business, had been on the selling block for two years waiting for one buyer that would take the whole company. In early 2001, the seller realized there was no logical buyer for a drug company and a condom manufacturer under one roof. At that point, Bear Stearns’ client MedPointe Capital Partners enlisted The Carlyle Group and The Cypress Group to back their bid for the health-care business.

With Carter-Wallace’s decision to split into two, auctions ensued in early 2001 – one for each of its businesses – and the Carlyle/Cypress/MedPointe team came out on top for the health-care side. Despite an onerous and unwieldy negotiation process that at times threatened to undo the deal, in the end it closed with Cypress and Carlyle each committing more than $120 million in equity, with the remainder coming from MedPointe executives and two small co-investors.

Dahl began working in leveraged finance in the late ’80s at Credit Suisse First Boston and pulled off a couple of health-care deals then. He really got into the industry by “happenstance,” as he came to know the head of health care at CSFB.

And he likes where he’s ended up. Dahl says Carlyle has adroitly managed to escape many of the land mines that have undercut other firms. “Health care has been an oasis in a difficult market,” he says. “We did well in a tough market because health care is recession-resistant.”

He does allow that it’s harder to find attractive deals these days, which explains why the ones that have been done lately are so highly priced. The upside: Many of those acquired companies have gone public, which is no easy feat in this market.

Although Carlyle doesn’t have the historical base in health care that it does in other sectors, today health care is very much at its core, which is why seven professionals and another on the way have been assigned to the business.

Carlyle’s health-care strategy is to avoid nursing homes, hospitals and institutions where reimbursements are part of the revenue model.

Carlyle has amassed what Dahl describes as a pretty eclectic portfolio, with no one specific focus. “We know enough to be dangerous, and we know where to go and get help if need be,” he says.

For example, there is Empi, which Carlyle acquired in a public-to-private transaction in 1999.

For more than two decades, Empi has been a leading manufacturer and provider of non-invasive medical products for physical rehabilitation and, more recently, for the treatment of incontinence. It markets such products as continuous passive motion devices, knee braces, electrotherapy, and a wide range of orthopedic soft goods. Customers include orthopedic surgeons, orthotists and orthopedic dealers.

Then there’s Align Technology, whose signature Invisalign makes invisible plastic retainers for straightening teeth – the product Dahl tried out for himself.

The adult patient wears a clear plastic “aligner” that fits tightly over the teeth, rather like a sports guard, and gently but firmly moves them back into line. Every two weeks, the aligner is discarded and replaced with a new, slightly modified one, until the desired effect is achieved. Dahl wore one for nine months and said no one ever noticed he had it on.

Another company Dahl’s team took on is InteliStaf, specializing in travel to combat the nation’s chronic nursing shortage. InteliStaf flies RNs to destinations throughout the U.S. for an extended period, generally 13 weeks, but sometimes as short as eight weeks or as long as 26 weeks. Nurses are offered free transportation and lodging, in addition to generous wages. For example, a nurse in New York may request a winter assignment in Florida or a nurse in Florida may ask for a summer job in New Hampshire. It is designed to offer nurses greater flexibility. They’re not forced to go somewhere they don’t want to.

Dahl says this long-distance per diem staffing area has been “a high growth market for six or seven years. We don’t see a change in the near term because the problem is acute.”

Dahl says he has been spending a great deal of time with his portfolio companies this year. It’s partly because of slower deal flow. But after spending some time with him, it’s obvious he just loves this stuff.

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Fact Sheet for Bob Dahl

Born: Sept. 4, 1956

Education: B.A., Middlebury College; M.B.A., Harvard

Career Path: Price Waterhouse; First Boston; The Carlyle Group

Favorite Book: Scrambles Amongst the Alps By Edward Whymper

Favorite Movie: My Cousin Vinny

Favorite Food: Fruit Smoothies

Favorite Web Site:

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