12/09/2009

Lucrative Exit Brightens Outlook for DW

DW Healthcare's capital-raising prospects just got a lot stronger.

Following through on a deal it announced last month, Roper Industries said on Dec. 8 that it had completed a $300 million purchase of ultrasound-device maker Verathon from a DW-led buyout group for $300 million. What wasn't said: That price equates to an impressive 51% rate of return.

DW bought Verathon in early 2005, with Rho Capital as a co-investor. Now the deal is sure to be featured front and center of the Salt Lake City firm's next fund-raising pitch - which sources peg as likely to start in early 2010 under the banner DW Healthcare Partners 3. Also prominently displayed would be DW's $22 million sale of Global Physics to Landauer in November.

DW's ability to hang its hat on some recent exits likely comes as a relief to the firm's leaders, helping to turn some attention away from staffing-related issues that were causing some unease. The capital-raising campaign for the firm's second fund hit a speed bump midway through when co-founder Skip Klintworth called it quits in 2007, saying he wouldn't play any role on the vehicle.

While Klintworth wasn't the only "key man" involved with the fund, investors were unsettled by the move. One big backer, rumored to be a U.K.-based charitable foundation, called off a commitment. Another opted to pass on the offering.

Now, with the Verathon and Global Physics deals, DW is hoping it finally has proof that remaining founders Andrew Carragher and Jay Benear constitute a viable investment team. The firm has also enlisted operating partner Rod Boone since forming the last fund, and last month added former Procter & Gamble executive Jeff Davis to its roster of portfolio-company consultants.

DW's limited partners have included Rho, H&S Ventures, Parish Capital, Wega Support and Wellcome Trust.