Welsh, Carson, Anderson, Stowe Wraps Fund XI At $3.7B

Welsh, Carson, Anderson & Stowe has held a final close on its latest fund, securing pledges of $3.7 billion, according to a source familiar with the fundraising effort. The target for WCAS XI LP, which began marketing in 2007, was $3.5 billion, the source said.

The firm finished 95 percent of the effort in the fourth quarter of 2008 but had left the pool open until the end of May to accommodate a few stragglers, the source said. Originally, Welsh, Carson, Anderson & Stowe had discussed seeking between $4 billion and $5 billion for the pool with investors, according to the source.

The firm didn’t respond to a request for comment.

Limited partners include California Public Employees’ Retirement System, California State Teachers’ Retirement System, Canada Pension Plan, University of Missouri, and the New Jersey Division of Investment, according Thomson Reuters data. The firm held an initial close at $2.5 billion in June 2008 then disclosed an additional $600 million in pledges in September 2008. About $800 million worth of the total pledges came from new investors, the source said.

New York-based Welsh, Carson, Anderson & Stowe, which was founded in 1979, invests in the health care and information/business services sectors. Typically a control investor, the firm engages in a number of different types of transactions, including growth equity deals, buy-and-build transactions with smaller platform acquisitions, large public-to-private acquisitions and corporate carve-outs.

The predecessor fund, WCAS X LP, wrapped in June 2006 with capital commitments totaling $3.4 billion. According to performance data from CalPERS, which made an $175 million pledge to the pool, Fund X had posted a net IRR of 4.1 percent and an investment multiple of 1.10x as of Sept. 30, 2008.

Describing itself as “deal size agnostic,” Welsh, Carson, Anderson & Stowe has a history of pacing itself, having invested between $1 billion and $1.3 billion annually in each of the last six years. The firm is also very active in using add-on acquisitions to bulk up portfolio companies. WCAS X’s portfolio companies have already completed 25 add-on deals, according to the firm’s Web site.

WCAS XI is already being put to work. Its first investment was the July 2007 acquisition of a majority stake in PayCom, an Oklahoma City-based provider of online payroll services, in a deal worth $56 million. The only other transaction occurred in February 2009 when the firm bought a majority stake in GeoDigm Corp., a Chanhassen, Minn., maker of dental bridge, crown and implant products. The GeoDigm deal included an initial equity component of $40.3 million with the firm committing to provide a total of $100 million to support the company’s acquisition program.

Welsh, Carson, Anderson & Stowe is also currently investing from WCAS Capital Partners IV LP, a dedicated $1.3 billion subordinated debt fund.