Water Street Floats New Fund

When JPMorgan and Bank One merged last year, everyone anticipated a shakeout involving the private equity arms of the two groups.

After the dust settled, it was determined that the private equity subsidiary JPMorgan Partners would split from the combined company, while One Equity Partners, Bank One’s private equity arm, would stay put.

That was the plan.

However, One Equity Partners lost an important cog on its health care team when Tim Dugan left the firm after 17 years with One Equity.

He formed Water Street Capital Management and the firm has now started raising $300 million for its inaugural fund, according to regulatory filings.

Credit Suisse First Boston is the placement agent for the fund.

Water Street, as a health care specialist, sees its opportunity at the small end of the middle market. One source familiar with the firm says that One Equity, even as a middle market firm, still operates a billion-plus fund, and Water Street will probably be looking to write checks of between $15 million and $70 million per deal.

In addition to Dugan, Water Street includes other One Equity veterans, such as One Equity Partner Kip Kirkpatrick and CFO Jeff Holway.

They have both joined Water Street as partners. Also, CareMark vet Jim Connelly, who was a consultant for One Equity, has joined Water Street as a partner.

Water Street will purchase companies that range from $50 million in size to as much as $500 million, and will participate in carveouts, recaps, corporate partnerships, or standard buyouts.

In the health care space, Water Street’s website indicates that the firm specifically targets the medical products, specialty services and pharmaceutical sub sectors.

The health care space has always drawn private equity interest, though more and more specialists are launching new firms. This year alone, Miguel Fernandez recently launched MBF Healthcare Partners while GTCR Golder Rauner vet Donald Edwards wrapped up fund-raising for Flexpoint Partners’ inaugural fund (a financial services/health care hybrid). Also, Linden LLC has launched its first fund, which is focused on the life sciences area.

This story originally appeard in Buyouts, a related publication.