With 2017 now in full swing, we wanted to share with you the highlights of our very busy 2016!
The past year has been one of DFW’s most active. In April, we held a first and final closing on our fifth dedicated investment partnership. DFW Capital Partners V, LP was raised in less than three months, securing committed capital of $360 million from a diverse group of “blue-chip” insurance, pension, endowment, fund of funds and family office institutional investors. We also enjoyed a very high re-up percentage from our existing Fund IV investors. As described below, Fund V is off to a strong start with three new platform investments already completed.
From a deal perspective, DFW had a very active year in terms of activity and capital deployment – completing four new platform investments and 16 add-on acquisitions. In March, DFW’s Fund IV established its seventh platform company with the acquisition of Superior Controls. Superior is a leader in providing engineering, design, installation and ongoing operational support for automation and control systems for the biotech and life sciences industry. Superior’s growth strategy revolves around expanding its geographic and services footprint to provide a broad suite of services to biotech and other “tight-tolerance” process-intensive manufacturing environments – with add-on acquisitions expected to play a key role going forward. In September, DFW’s Fund V completed its first platform investment with the recapitalization of LRI Energy Solutions. LRI is the leader in providing lighting and water systems retrofit services to both the federal government and education/healthcare marketplace – focusing on self-funding, conservation-driven solutions that reduce energy consumption and improve building infrastructure. LRI is actively seeking acquisitions to broaden its capabilities and customer base and, in early January, it completed its first tuck-in acquisition which expanded its service and geographic footprint. In December, Fund V closed the acquisition of Children’s Dental Health Associates, a leading pediatric dental services platform operating in the Pennsylvania marketplace. CDHA is DFW’s third investment in the dental practice management arena, and represents a unique opportunity to leverage the company’s outstanding clinical reputation into a multi-state, multi-discipline provider to the pediatric community. In early February 2017, DFW closed a growth equity investment in Saol Therapeutics, a specialty pharmaceutical company focused on acquiring and developing therapies for orphan and rare diseases. Saol is DFW’s fourth specialty pharma investment in the past ten years – and yet another compelling opportunity to leverage the expertise of our operating partners, Bala Venkataraman and Dr. Virinder Nohria.
On the add-on acquisition front, Covenant Surgical Partners continued to build out its national footprint with the acquisition of four endoscopy-focused surgery centers, three combination endoscopy practice/surgery center/lab operations and one ophthalmology practice/surgery center combination. Covenant also recruited a new CEO during the year, expanded its high yield bond facility and positioned itself for significant future growth in this exciting and still-fragmented field. Also during the year, Sebela Pharmaceuticals completed several product acquisitions in two separate transactions, further expanding its product portfolio and firmly establishing its three therapeutic vertical markets in gastroenterology, women’s health and medical dermatology. DFW’s platform in pediatric therapy services, TheraPlay, completed a strategic acquisition of a leading contract therapy provider, doubling the size of the company and further expanding TheraPlay’s footprint into the education market, complementing its fixed-location therapy centers. Evolution Research Group, DFW’s leading clinical research site operator focused on special patient populations, completed a key acquisition which nearly doubled the size of ERG and added key diversification into new therapeutic areas and geographies. Finally, in furtherance of its expansion into specialized facility washing services, Fleetwash completed four small tuck-in acquisitions during the year.
In support of our robust investment activity and newly-raised Fund V, DFW added to its investment and Operating Partner team. Andrew White joined DFW in 2016 as a senior associate, making a substantial contribution to our firm. Further Michael O’Donnell, a former Operating Partner and portfolio company CEO, rejoined DFW’s team after transitioning out of his CEO role with Keane, a business DFW sold in 2015. DFW also added two new Operating Partners – Dr. Alan Finkelstein and Jeffrey Kinell. Alan has been actively involved with DFW evaluating dental investment opportunities, including its recent CDHA platform, having spent a long career as head of United Healthcare’s dental business. Jeff, who has a long history of building and leading pharma services and healthcare-related companies, is an active board member of ERG and more recently CDHA.