Healthcare PE Shops Find Fundraising Success

Fundraising may be hard right now, but a few PE firms in the healthcare space are experiencing success.

Chicago-based Linden LLC, for example, recently closed its second fund with $375 million. The fund was oversubscribed and exceeded its $300 million target. Another area firm, RoundTable Healthcare Partners is raising up to $600 million for its third fund, and sources tell me that it should have little trouble hitting its numbers.

Linden’s and RoundTable’s experiences come as global fundraising in second quarter dropped to its lowest point in second quarter since 2003.

RoundTable has had four exits from its first fund, each of which generated a return of 5x the cash invested or greater, peHUB has learned. This includes December’s sale of Ascent, which the firm says generated an 8.3x return upon its sale to Stryker Corp.

Linden has also made some notable exits. In 2008, the firm sold Ranir, which makes dental strips, to Kayak Holdings. Linden sold Ranir at a huge multiple and realized a sizeable return on the transaction, a private equity source said. Linden’s first fund raised $200 million in 2006.

“They’re off to a good start,” a source said.

More importantly, Roundtable and Linden play in the healthcare sector. President Obama’s healthcare overhaul bill has made the sector hot, says Jeremie Le Febvre, partner in charge of new business at Triago, a placement agent. “Everyone thinks a lot of cash will go into that sector over the next five to 10 years.”

Traditionally, investments in the sector have been mainly venture-based. But buyout funds are coming into the space. Several large PE shops, like TPG and the Blackstone Group, already invest in the sector. Healthcare is one of the key sectors for Warburg Pincus. Executive Health Resources, a medical outsourcer owned by ABRY Partners, is up for sale and expected to fetch $1 billion to $1.2 billion.

Healthcare is attractive for one main reason: it’s a good investment. Except for 2007, healthcare has consistently produced double digit IRRs since 1997, according to data from the Cambridge Associates. “It’s a rather compelling sector,” Le Febvre says.