Welsh Carson Seeks Toeholds Via Stock

Welsh Carson Anderson & Stowe, which typically does buyouts, is currently looking at several minority investments in public companies, Paul Queally, co-president of the firm, said during the closing panel at Buyouts New York conference.

“You might see some 13-Ds from us,” Queally said, in response to a question on opportunities the firm is seeing.

Though Welsh Carson Anderson & Stowe has pursued the strategy before, its renewed interest offers an interesting look at how some firms are grasping for an edge at a time when many companies are selling for high prices. “It’s a very difficult time to make money,” Queally said of the deal environment during the panel.

After the panel, Queally said the New York-based shop is pursuing the strategy in part because it feels that, in a hot deal environment, companies on the block are generally being bid up too much. “There’s a lot of companies we think might go for sale,” Queally said. By getting a toehold in the company, he said, “We could get a preferred position.”

Founded in 1979, Welsh Carson Anderson & Stowe primarily targets deals in health care and information and business services. The firm manages more than $20 billion and is currently investing from its 11th buyout fund, which it closed in 2009 with $3.7 billion in commitments.

The high level of deal-price multiples was a popular subject of discussion at the conference, held at the Plaza Hotel on April 26 and 27, with many industry professionals expressing astonishment with a dash of concern at the return of fevered auctions so soon after the financial collapse. “When I see the deals getting done now … they have the whiff about them of 2006-2007,” said David Shapiro, co-founder of the turnaround shop KPS Capital Partners, during a keynote interview.

Though taking minority stakes in a public company is not the most common strategy for Welsh Carson Anderson & Stowe, Queally said the firm has taken positions in public companies in the past. For example, in 1999 it bought Concentra Managed Care Inc. in a deal valued at more than $1 billion after holding a 14.9 percent stake in the health care cost-control service provider.

Ironically, it’s a strategy more frequently executed by Leonard Green & Partners, whose Managing Partner Jonathan Sokoloff shared the dais with Queally during the panel discussion and for which Queally expressed admiration for its flexibility.