Water Street Healthcare to Market Fund III Soon

Who’s next in the fundraising parade?

Water Street Healthcare Partners will be out marketing soon for its third fund, four sources say. The Chicago-based PE firm, which focuses on the healthcare industry, raised $650 million in 2008 with Water Street Healthcare Partners II LP. A net IRR for the fund wasn’t available, according to June 30 data from the University of California Regents.

“Water Street is planning to go soon,” one placement source says. The PE firm will likely use Credit Suisse as a placement agent, or do it alone, the person says.

Another source says Water Street doesn’t plan on using a placement agent and their new fund will likely be oversubscribed. “LPs are calling them to get in,” the person says.

More than 70% of Fund II is already committed to nine healthcare companies, a different source says.

Officials for Water Street declined comment.

Water Street has been busy recently. Last week, Water Street completed the sale of Physiotherapy Associates to Court Square Capital Partners. The PE firm, in April, agreed to buy the Orthofix’s Sports Medicine Business Unit, which operates as Breg, for about $158 million. Last June, Water Street committed up to $70 million equity to the buy of MarketLab.

In 2005, a group of executives from One Equity Partners’ healthcare group founded Water Street. The PE firm currently focuses on four segments of the healthcare industry: medical and diagnostic products, specialty distribution, outsourced healthcare services and specialty pharmaceutical products and services. Transactions range from $50 million to $500 million, according to the firm’s web site.

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