The full-service merchant bank Partnership Capital Growth Advisors (PCGA), which is based out of San Francisco, California, will start to raise its third fund in early November.

The firm plans on raising $200 million and will put the capital to use within the health and wellness space starting in early 2011, said David Thibodeau who recently joined the firm.

PCGA’s first fund, which has $30 million in committed capital, primarily focuses on equity. The second fund, also with $30 million, is used for debt transactions. Both funds are over 2/3 invested. “The third fund will invest up and down the capital structure, combining and extending what we’ve done in the first two funds,” said PCGA’s managing partner and founder Brent Knudsen. 

PCGA has a holding period of three to five years for its investments and looks for returns within the range of 3x to 5x capital, said Knudsen.

The firm is extending its services to the east coast and opening a new office in Boston where Thibodeau will co-manage the new growth fund.

“What I really liked about Partnership Capital Growth is the sole focus on the healthy active and sustainable lifestyle area,” said Thibodeau. The firm offers full-service merger and acquisition, financing and advisory services to middle market companies as well as private equity capital through its first two funds. It focuses exclusively on consumer products and services in the healthy, active and sustainable living arena. 

The health and wellness space is $250 billion market and continues to grow. Thibodeau and Knudsen pointed out that there are major trends that have been going on for the last 20 years. The US is currently dealing with the obesity and chronic disease epidemic, as well as the aging. “There is one real solution to help to reduce these cost and that solution is wellness and taking health in your own hands and that’s what we are really all about,” he noted.

Prior to PCGA Thibodeau served ten years as a managing director and the head of the health, wellness and lifestyle investment banking group at Canaccord Genuity. Before Canaccord he worked at Wellfleet Capital Partners where he provided M&A and private placement advisory to companies.

Thibodeau was involved in a number of transactions throughout his career. Those deals include the Martek Bioscience purchase of Amerifit Nutrition for $200 million in cash, which took place this year. In 2009 he worked on the Garden of Life sale to Atrium Innovations for $35 million and the Metagenics joint venture with Alticor. Other notable deals consisted of Imagine Foods sale to Hain Celestial for $52 million, the EAS sale to Abbott Laboratories for $320 million, ZonePerfect Nutrition Co’s which also sold to Abbott Laboratories for $160 million, and then the sale of SunPure to Kerry Group PLC for $68 million.

PCGA will seek out investments that has an enterprise value between $50 million to the $500 million range, said Thibodeau. Unless there is a clear solvable issue the firm does not invest in distressed assets and prefers to stick with growth companies instead. “On the larger side we will do it with co-investors." 

PCGA has a string of co-investors it teams up with since its founding in 2005. The firm invested along side TSG on beverage the beverage investment of MonaVie, and Cyto Sport, the maker of Muscle Milk. The firm also has investments with North Castle Partners and Rustic Canyon / Fontis Partners. “We also have a great relationship with Carlyle,” said Knudsen.

There are four core areas in the health and wellness space that PCGA hones in on. The first is in the healthy active lifestyle circle, which includes supplements, functional foods and beverages, complementary alternative medicine, fitness equipment and services as well as brick and mortar gyms. The second would be within the natural organic space, which it will invest in foods and personal goods. The firm will also tap into the weight management space as well as the growing market of the wellness information technology space. Companies that are similar to WebMD would be of interest to the firm. “There are smaller players we will pay attention to but they are too small for us to invest but as those grow that is when we are going to be really interested,” said Thibodeau.