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Streetwise U.S. private equity firm picks Toronto for East coast office

Toronto skyline

Michelle Siu/THE CANADIAN PRESS

When Andrew Carragher left Canada to make a career in the U.S. almost 20 years ago, Toronto was not really on his radar as a place from which to run an investment firm. Now, Mr. Carragher has moved a significant chunk of the private-equity firm he co-founded to the city, choosing it as the new eastern office for DW Healthcare Partners.

Mr. Carragher's DW Healthcare Partners, which runs assets of about $500-million (U.S.), now has eight people in Toronto. About of half of them are Canadians, but the other half are not, he said. What's more, the firm doesn't yet have any eastern Canadian portfolio companies.

So why Toronto? Aside from Mr. Carragher's roots, and the fact that it's a nice place to live, he cited the ease of getting around the East coast, where many of DW's investments and investors are located. The company's professionals were spending big chunks of the year heading east from DW's western office in Park City, Utah.

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What's more, with tax rates changing in the U.S., and the Obama administration looking especially at closing a loophole for private equity funds, Canada is increasingly becoming more competitive as a place to work running money.

"It's exciting to be back," Mr. Carragher said. "Toronto 15 years ago probably wasn't on the map for us. Now it's an exciting, very doable city and easy to get around the East coast."

Now that DW is in Canada, it will be looking for more investments in the country on top of the single Canadian purchase of a Vancouver company about five years ago, he said.

DW just raised its third fund, a $265-million fund. It has already made three investments from the new fund, totalling $80-million. The firm looks to write cheques of $20-million to $30-million, in companies with earnings before interest, taxes, depreciation and amortization in the $5-million to $10-million range. DW usually ends up buying stakes off founders of companies looking for liquidity.

"My pitch to founders is if you own a health-care company in Canada, you are going to have to do business in the U.S. to grow to a certain size," said Mr. Carragher. "And we're a good partner because we know the U.S. better than anyone up here."

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