Welsh Carson approaches the finish line with $5bn Fund XIV

Welsh Carson Anderson & Stowe, a longtime investor in healthcare and technology sectors, collected an initial $4 billion-plus for a 14^th flagship buyout offering.

The fundraising was reported last week by the New York private equity firm in Form D documents. WCAS XIV is now more than 80 percent of the way to its $5 billion target, disclosed earlier this year in a Minnesota State Board of Investment report.

The vehicle has a hard-cap of $5.5 billion, sources told Buyouts.

At its present level of commitments, Fund XIV is almost the same size as its predecessor, closed in 2019 at a $4.3 billion hard-cap. The new offering’s placement agents include Credit Suisse and Merrill.

PE fundraising is likely to slow in 2022, as a crowded marketplace vies for LP money that could be in shorter supply due to overallocation and other factors. While timelines may be extended, big, brand-name managers with large bases of repeat investors are expected to persevere.

Welsh Carson, founded in 1979 by Bruce Anderson, Russell Carson and Patrick Welsh, is today led by a team of 16 GPs.

Last year, the firm underwent a change in leadership, with Scott Mackesy becoming the sole managing partner, as former co-managing partner Anthony de Nicola was elevated to chairman. Michael Donovan was also named head of tech investing, and Brian Regan, head of healthcare investing.

Mackesy, de Nicola, Donovan, Regan and GPs Eric Lee and Jonathan Rather sit on the management committee. Lee is head of diversity and inclusion. Rather is the only shareholder who owns more than 25 percent of Welsh Carson, according to its ADV filings.

Welsh Carson makes control investments of $250 million to $500 million in category-leading US mid-market healthcare and tech companies, typically with values of $250 million to $1.5 billion. Fund XIV is expected to make 14 to 16 investments, a Connecticut Retirement Plans and Trust Funds report said.

The firm sources opportunities thematically, with healthcare segments of interest including pharma services, provider partnerships, healthcare IT, facilities, medtech and payors. In tech, segments of interest include information services and data analytics, IT infrastructure, mobile, fintech, B2B software and payments.

Working with management teams, Welsh Carson aims to build value in portfolio companies through a mix of operational improvements, internal growth initiatives and strategic acquisitions. The 16 GPs and some 45 investment professionals are supported by a resource group composed of about 35 operating partners, the MSBI report said.

Welsh Carson has so far announced two new platform deals this year, one in healthcare and the other in tech.

In March, the firm said it agreed to acquire a majority stake in Liberty, a dental benefits administrator, alongside Anthem as a minority partner. Earlier, it invested in Linq, a K-12 operations tech provider, joining existing backer Banneker Partners.

WCAS XIII was performing strongly as of last September, according to the MSBI report, with a 1.3x net multiple and a 41 percent net IRR. Fund XII was earning a 2.5x net multiple and a 32 percent net IRR.

Welsh Carson declined to comment on this story.