Scoop: 💸 Webster Equity gathers $1.7B for fifth fund

Webster Equity Capital racked up $1.7 billion for its fifth buyout fund, sources tell Axios.

Why it matters: Fund V cements Webster's transition to a health care-exclusive strategy, having also put money to work in the branded-consumer and business services arenas in prior funds. (Fund IV was 90% health care, and fund III, 70%.)

• It also underscores LP appetite for health care exposure in today's uncertain environment, with IRRs of deals in the sector having outperformed the broader PE market by a median 6 percentage points over the last decade, per Bain & Co.

By the numbers: Closing on $1.7 billion, Waltham, Massachusetts-based Webster surpassed its original $1 billion target and $1.5 billion hard cap, which it subsequently boosted to $1.7 billion.

• Fund V is already 40% deployed across six platforms, sources say.
• Webster invests in health care businesses typically generating between $5 million to $20 million of EBITDA, on $20-$200 million in revenues.

Context: Webster targets health care subsectors including post-acute care, physician practice management, behavioral health, payor services, value-based care and pharma services. In recent exits ...

• Webster sold Epic Staffing Group to The Pritzker Group in a deal said to be valued at about $675 million, Axios wrote. That translated to a 4.7x MOI and 68% IRR, sources say.
• In June, Webster sold Healthcare Associates of Texas to UnitedHealth Group's Optum, Axios wrote.

Catch up quick: Webster has consistently about doubled in fund size each go-around.

• Fund II raised $200 million in 2007.
• Fund III, which collected $400 million in 2015, is now fully realized. The fund generated a 4.5x gross MOI, the sources say.
• Fund IV raised $875 million in 2018 and is fully invested. That translates to a 2.5x gross MOI to date, they say.

State of play: Volatility or no volatility, we're seeing more health care-dedicated strategies take shape — and bigger funds — in this market.

• The number of health care-focused funds initiated in 2021 grew to a record 358 accounting for a whopping $93 billion in capital raised, Bain says.
• Notable fundraises to keep tabs on this year include Patient Square, which is targeting $4 billion for its debut health care firm; TPG, which is targeting $3.5 billion for a second health care fund; Chicago Pacific Founders, which is targeting $700 million for its third fund; and Martis Capital, which is fast approaching its $700 million target.
• Elsewhere, KKR closed its KKR Health Care Strategic Growth Fund II on $4 billion, while RoundTable Healthcare Partners closed its sixth fund on $800 million.