Stamford, Connecticut-based private equity firm Galen Partners has closed its fifth fund on $250 million. Like its predecessors, Galen Partners V will focus on investments in the healthcare information technology/outsourcing, medical devices and specialty pharmaceutical companies.
The fund was significantly oversubscribed, according to managing partner David Jahns, but Galen turned away investors in order to stick to its hard cap.
“We felt that if we took on more capital we would be forced into competing with the middle market buyout firms, doing deals with much higher valuations than we are typically able to invest in,” Jahns said.
The firm seeks investments of between $10 million and $30 million, a level at which Galen can carry out transactions without the use of debt. Such a strategy is particularly relevant as debt markets have shown increasing skepticism to leveraged buyouts in the US and Europe. Just last week rating agency Moody’s criticised the level and nature of debt available to buyout firms, and news agency Bloomberg reported that asset managers at Fidelity and Lehman Brothers were avoiding leveraged buyout debt.
Fundraising for Galen Partners V began in the fall of last year and wrapped up in June. Jahns described the process as “very focused”. The firm successfully courted all of the limited partners from Galen Partners IV, and added a few new investors, bringing the total number of LPs to 20. Galen Partners IV closed in 2004, also on $250 million.
Galen’s investment strategy for its fifth fund will be a continuation of the principles that have guided its previous deals: the firm will provide expansion capital for companies with proven technology. Jahns said that at present the firm is particularly interested in firms with proprietary devices that can improve the effectiveness of delivering healthcare at a lower price. Its 22 portfolio companies include Dow Pharmaceutical Sciences, MRI maker ONI Medical Systems and disease management service provider QMed.
The fund has not yet made any investments, but Jahns said the firm expects to close a deal sometime in the next quarter.