Venture capital fund seeks health company partners

$88 million: There must be a willingness to sell 40 percent to 60 percent of the company

By Linda Fantin
The Salt Lake Tribune

http://www.sltrib.com/business/ci_2429185

DW Healthcare Partners is looking for a few good clients looking for a few million bucks and the moxie to expand their health-care businesses for sale in three to five years.

The Salt Lake-area private equity firm has $88 million to invest in five or six companies specializing in medical devices, products, services or distribution. Ideal candidates are mid-stage, profitable companies earning $2 million to $10 million a year with the potential to make 10 times that.

About 90 businesses in the Intermountain region fit that profile and many more might be persuaded to move their headquarters here, said Andrew Carragher, one of DWHP’s four managing directors. While proximity to Utah would pare travel expenses, it is not a requirement; the fund’s first client is a company out of Orange County, Calif.

What is critical, however, is a willingness to sell 40 percent to 60 percent of the company and to embrace DWHP’s expertise. Collectively, the four managing directors have built and sold 26 health-care companies, tackling many of the problems their new clients now face.

"We don’t want to run the company, but we’re not going to make a minority investment and just take off," Carragher said. "We plan to spend a lot of time with each company."

With only 14 venture capital funds in Utah, DWHP is bound to attract a lot of attention. Not only did the directors kick in $13 million of their own money, they are introducing well-funded, out-of-state investors to Utah.

Among them:

l The London-based Wellcome Trust, which has contributed $300 million to $400 million to medical research. With $22 billion in assets, it is second only to the Bill and Melinda Gates Foundation in charitable research.

l The Cheyne Walk Fund, established by British billionaire philanthropist Sir Paul Getty, who died a year ago.

l Rho Capital, a New York City fund of funds with $2 billion of capital under management.

l Parish Capital, a new $200 million North Carolina-based fund run by former directors of private investments at Duke University and the University of North Carolina at Chapel Hill.

l H&S Ventures, whose investment and charitable arm is run by Henry Samueli, co-founder of Orange County chipmaker Broadcom.

In all, 14 private institutions and 23 individuals have put fuel in the DWHP fund. If those investors make money in this market, they may want to broaden their portfolios to include other Utah companies, said Brad Bertoch, president of the Wayne Brown Institute, a Utah nonprofit that helps high-tech companies attract capital from venture funds.

And because DWHP’s background is a blend of information technology and life sciences, Bertoch believes its partners will succeed.

"They are playing a game they understand better than most people," Bertoch said. "And someday they’ll have a limited partners meeting in Utah. All these guys will fly in from Europe and the East Coast and go skiing and see what a great place this is."

[email protected]

Who’s involved?

W.C. "Skip" Klintworth
Founder/managing director

* Background: Founded Promedix Corp., the first e-commerce company to streamline the supply chain for specialty medical products; later sold to Ventro Corp. in a stock deal worth $300 million.

Andrew Carragher
Founder/managing director

* Background: Responsible for more than $1.2 billion in mergers and acquisitions, including Ventro’s purchase of Promedix and SpecialtyMD.

Jay Benear
Founder/managing director

* Background: Presided over expansion and sale of Cancer Care Associates to US Oncology; served on board of Promedix with Klintworth.

Barrie Keiser
Managing director

* Background: Helped lead Baxter International’s spinoff of Allegiance Healthcare, the $4.5 billion publicly traded manufacturer and distributor of medical/surgical supplies. Served as CEO of Promedix.