DuneGlass strikes first deal, investing in weight-loss company Grand Health Partners

The healthcare-focused firm, launched in 2019 by a former Sterling Partners investor and former AlixPartners consultant, is investing on a deal-by-deal basis.

DuneGlass Capital has invested in Grand Health Partners, a Michigan physician group tackling obesity through surgical interventions and associated non-medical weight-loss programs, the newly formed firm told PE Hub.

DuneGlass acquired a majority stake in Grand Health Partners, while the provider’s existing physician owners, including Co-Founder Dr. Randal Baker, have remained significant owners in the company, DuneGlass Managing Partner Dan Hosler says.

The investment is the first to date for Chicago’s DuneGlass, a growth-oriented firm launched in early 2019 to back entrepreneurial healthcare services companies.

Hosler, who previously spent about 12 years co-leading healthcare investing efforts at Sterling Partners, launched DuneGlass in 2019 alongside Managing Partner Ryan Graham. Graham most recently worked as a management consultant at AlixPartners, while Hosler most recently led acquisition efforts for Sterling portfolio company Grand Rapids Ophthalmology.

Hosler and Graham have known each other for many years, having earned MBAs together from the Kellogg Graduate School of Management at Northwestern.

Grand Health Partners, based in Grand Rapids, Michigan, offers both surgical and non-surgical weight loss services and programs through its network of bariatric surgeons, registered dietitians, exercise physiologists and behavioral therapists. Bariatric surgical procedures include Sleeve Gastrectomy and Gastric Bypass, or Roux-en-Y.

With locations in Grand Rapids and Petosky, Michigan, Grand Health Partners will look to expand in the Midwest, while over time seeking to build a platform that expands beyond bariatric surgery and into broader general surgery services, Hosler said.

DuneGlass deemed bariatric surgery an attractive vertical for investment given the market’s fragmentation and strong underlying macro trends, Hosler says.

While chronic obesity hasn’t been treated as a disease historically speaking, scientific research is starting to show there are a number of associated comorbidities – such as type 2 diabetes – that can be significantly reduced through bariatric surgery, he said.

Hosler pointed to a recent Cleveland Clinic study illustrating that patients with type 2 diabetes and obesity who underwent weight-loss surgery were less prone to costly conditions such as cardiovascular disease.

Elsewhere, an October study by JAMA showed that obese women who underwent gastric bypass surgery were at less risk of having babies with birth defects.

From a private equity perspective, the only other deal to-date in bariatric surgery occurred in August, when Sentinel Capital Partners recapitalized SSJA Bariatric Management. SSJA, which provides administrative services throughout the New York metro area, was advised by Cain Brothers on the deal.

DuneGlass is investing on a deal-by-deal basis, but will consider raising a dedicated pool of capital, Hosler says. No timeline for a potential fundraising has been set, he says.

The firm targets physician practices generating up to $1.5 million in Ebitda, with the goal of building platforms to $5 million-plus in Ebitda, partly through a buy-and-build strategy, he says: “We’re really helping companies prepare to work with mid-market PE funds. We can fix operational inefficiencies, but as non-doctors, we cannot fix bad patient care.”

The firm is actively exploring two additional platform investments in the healthcare services.

While Hosler declines to identify specific sub-sectors in its pipeline, DuneGlass likes physician practice management, broadly speaking, as well as healthcare services including tech-enabled healthcare services and distribution models.

As DuneGlass seeks to grow its initial platform and add additional platforms, the firm will look to add two to four employees to its investment team this year, Hosler says.

Action Item: Get in touch with DuneGlass’ Hosler at dhosler@duneglasscapital.com