06/30/2010

Healthcare Buyout Fund to Draw Crowd

Buyout firm RoundTable Healthcare has started talking to would-be limited partners about its next fund, which investors expect to be one of the most sought-after private equity offerings of the year.

The vehicle would be the third set up by the Lake Forest, Ill., firm, which is returning to market with plans to raise $600 million to $700 million. Investors are tripping over themselves to gain access.

An investor familiar with RoundTable said it has consistently generated profits in the neighborhood of 4-6 times invested cash on its deals. The firm could raise $1.5 billion if it wanted, he said. "They're going to be so oversubscribed it's not funny," he added, voicing a sentiment echoed by other market participants.

The reason? In addition to producing stellar profits, RoundTable is viewed as sticking to its core investment philosophy and not running up fund sizes each time it comes to market. Consider that the shop's first fund from 2001 lined up $400 million of commitments, and since then the firm has raised its targets more modestly than most other fund managers. That restraint is prized by investors.

The firm finished marketing its next fund, RoundTable Healthcare Partners 2, with $500 million in 2005.

One market player is so devoted to RoundTable that it makes an exception to one of its investment rules only for that firm. The investor typically won't commit capital to a given buyout vehicle unless it's also able to co-invest in deals alongside the fund manager. However, the investor doesn't require that of RoundTable.

The firm focuses on pharmaceutical, healthcare-distribution and medical-device companies, with an eye toward improving operating efficiency. In addition to its two prior buyout funds, it raised $200 million for a subordinate-debt fund that closed in 2006. RoundTable is run by Joseph Damico and Lester Knight, who previously held executive positions with Cardinal Health, a pharmaceutical- and medical-supply company. They set up the firm in 2001 with Credit Suisse alumnus Todd Warnock, and Jack McGinley, who before that was an executive with a company similar to Cardinal, Baxter Healthcare.