Private equity firm Frazier Healthcare Partners has raised $1.4 billion for its tenth growth buyout fund as it looks to place its next bets in the healthcare technology sector.
The Seattle firm said it closed Frazier Healthcare Growth Buyout Fund X LP at its hard cap and that it was oversubscribed. With its latest healthcare private equity fund, the firm plans to focus on the middle market.
The fund far surpasses its predecessor, which closed on $780 million in 2018.
The offering received support from new and existing limited partners, which include public pension funds, financial institutions, foundations and endowments, family offices, corporate pensions and sovereign wealth funds, the investment firm said.
The majority of investors from its previous fund, FHGB IX, increased their commitment to FHGB X.
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“We are humbled and grateful for the continued support and partnership of our long-time investors and are pleased to welcome a blue-chip group of new investors into the Frazier family,” said Nader Naini, co-managing partner at Frazier in a statement. “The global interest in our fund is a testament to our unique strategy and proven track record of developing market-leading healthcare companies. We view this responsibility as a privilege and honor.”
Frazier has set a clear target on acquiring controlling interests in healthcare companies with EBITDA between $10 million and $75 million where it can invest between $50 million and $300 million of equity. Investments can take the form of corporate carveouts of private and publicly traded companies, recapitalizations, and buy-and-build strategies, the firm said in a statement.
Frazier is looking at pharmaceutical services, the hospital outsourcing space and specialty distribution, Naini told Fierce Healthcare.
"We want to leverage artificial intelligence and data analytics to take cost out of what I consider to be an antiquated system of delivering care and administering care," he said.
Recent investments include the corporate carve-out of MedData from Mednax in October 2019. MedData is a leading provider of technology-enabled revenue cycle management services for hospitals, health systems and healthcare providers.
In December 2020, Frazier acquired a 50% stake in CSafe Global, a Dayton, Ohio-based provider of cold chain shipping and air cargo solutions to the life science and pharmaceutical industries.
Recent exits include the recent $3 billion sale of supply chain solutions company PCI to Kohlberg and Mubadala and a separate deal selling Northfield, a provider of operating room instrument, scope and power system repair services, for $475 million to Agiliti.
Frazier's approach to investment is a "thesis-driven, executive in residence-centered strategy," Naini said.
"We get comfortable with long-term trends in healthcare that we want to play into and identify, through our network, which we have developed over 30 years in the business, to identify someone who is historically private equity-backed operating in this space and who fits culturally with us to partner with to look for an asset serve as a platform to build on," he said.
That approach has enabled the investment firm to become a preferred partner to both serially successful executives and sellers of companies in targeted sectors of interest,” said Ben Magnano, co-managing partner at Frazier.
“Our three decades of focusing on the healthcare industry, breadth and depth of our ecosystem and team resonated with both new and existing investors, Magnano said in a statement.
The firm sees tremendous opportunities to invest in tech-enabled services to health systems.
"The hope for more efficiency around electronic health record systems is now turned into more of a reality, but there is still a tremendous unmet need and lack of investment in the healthcare IT infrastructure that takes out significant administrative costs," Naini said.
Founded in 1991, Frazier Healthcare Partners, with the addition of FHGB X, has more than $6.2 billion in total capital raised. The firm has invested in more than 200 companies with transaction types ranging from buyouts of profitable healthcare companies to venture capital and company creation.