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Webster Equity targets $1bn for first healthcare-only fund 

The firm is also considering exploring a secondaries continuation vehicle for two existing Fund III portfolio companies.

Webster Equity Partners is officially in the market with Fund V, its first healthcare-exclusive vehicle, according to sources with knowledge of the matter. 

Webster Equity Fund V, with a $1 billion target, hopes to hold a first close in mid-December, sources said. 

The firm’s fourth pool of capital, which closed on $875 million in 2018, is 75 percent deployed and close to 100 percent called and reserved, a source said. Webster Capital Fund III LP collected $400 million in 2014.

Webster’s fifth vehicle will invest in healthcare services only, targeting non-discretionary and medically necessary healthcare companies in the middle market. 

Fund V solidifies the private equity firm’s transition to a healthcare-only strategy. 

Webster, founded in 2003 and based in Waltham, Massachusetts, has narrowed its focus over the years, having previously put capital to work in the branded-consumer and business-services sectors. Today the firm targets profitable healthcare businesses typically generating $20 million to $200 million in revenues. 

Todd Rudsenske, a former longtime banker at Cain Brothers, a healthcare-focused division of KeyBanc, joined Webster as a partner in July. Rudsenske now co-heads the firm’s daily operations alongside Doug Williams and John Garbarino, existing partners at the firm. 

Rudsenske’s addition brought the firm to a 15-person roster, versus a 12-person team investing across two sectors when Fund IV was raised two years ago. 

Portfolio activity 

As Webster kicks off fundraising for its latest fund, the firm is also considering exploring a secondaries continuation vehicle for two existing Fund III portfolio companies: BayMark Health and Pharmalogic, one source said, cautioning that nothing has been decided.

BayMark, the country’s largest opioid-treatment company, generates EBITDA north of $70 million, whereas Pharmalogic, a specialty nuclear pharmacy business, posts $50-million-plus in EBITDA, the source said. 

Several secondaries processes, including single-asset continuation situations, have or are anticipated to hit the market as it emerges from the pandemic downturn.

For instance, after selling a stake in Ivanti to TA Associates, Clearlake Capital Group wants to extend its backing of the portfolio company through a process that would move the software business out of older funds into a continuation vehicle, Buyouts wrote in August.

Elsewhere, Thomas H. Lee Partners is seeking to raise $400 million to $600 million to move HighTower Advisors out of Fund VII and into a continuation vehicle, Buyouts previously reported.

Meanwhile, Webster’s existing portfolio companies have remained active through the pandemic downturn.

In August, Santa Monica Fertility announced its acquisition of Newborn Advantage Surrogacy, a Dallas-based surrogacy agency. Integrated Rehab Consultants and Belmar Pharmacy have also struck add-on acquisitions through the summer months. 

In new platform activity, Webster in early April launched a gastroenterology platform, One GI, after clinching an all-equity deal for Tennessee’s Gastro One. Webster agreed to make an equity investment of approximately $22 million in Gastro One, reserving up to $80 million in total equity for the new platform, Buyouts‘ sister publication PE Hub wrote.

Webster declined to comment.

Action Item: Read more about Webster’s shift to a healthcare-only strategy on PE Hub.