M&A Awards: The 4100 Group makes first two exits with a strong pipeline ahead

The sale last year of two portfolio companies marked the first exits for The 4100 Group Inc., the investment arm of dental insurer Delta Dental of Michigan and its Ohio counterpart.

Menlo Park, Calif.-based Gauss Surgical Inc. sold to Stryker Corp. in September for an undisclosed amount. Gauss Surgical developed a monitoring system known as Triton to provide clinicians an accurate estimate of a patient’s hemoglobin and blood loss during surgeries and births.

The same day Stryker (NYSE: SYK) announced the Gauss Surgical acquisition had closed, San Francisco-based Invitae Corp. (NYSE: NVTA) said it bought Ciitizen Corp., a genetics testing company in Palo Alto. The Ciitizen deal, valued at about $308.3 million, consisted of about $87.4 million in cash and 6.3 million shares of common stock, according to a federal securities regulatory filing by Invitae.

The two exits combined earned The 4100 Group a 2022 MiBiz M&A Deals and Dealmakers of the Year Award in the health care category.

Recording the exits after holding positions in each company for less than a year generated a strong return on investment and also created momentum for venture capital investing by the East Lansing-based 4100 Group.

“It was great to get a couple exits that early on,” said Scott Lancaster, the chief investment officer and managing director of private market investments for The 4100 Group. Lancaster called the exits a “great win.”

“It showed the board that we understand and we have very good deal flow, and we were able to execute on interesting transactions and actually bring these companies to an exit. It certainly provides a confidence booster for our board going forward that we should continue having venture as an asset class as part of a broader portfolio,” Lancaster said. “Financial returns are always nice, but I think more so it’s the confidence internally for us that we’ll keep receiving additional capital and get support to continue doing venture capital.”

The 4100 Group acquired positions in Gauss Surgical and Ciitizen in 2020 from Spectrum Health Ventures LLC, where Lancaster previously worked as clinical director.

Delta Dental of Michigan and Delta Dental of Ohio formed The 4100 Group in 2014 as a joint venture. Lancaster joined The 4100 Group in July 2020 and served on boards at both Gauss Surgical and Ciitizen following Spectrum Health Ventures’ initial investments. He brought to the firm expertise in venture capital while working with investment adviser Dr. Garrett Vyganta.

The 4100 Group initially focused on making later-stage equity investments primarily in the financial services sector and has been seeking add-on or tuck-in acquisitions to complement those holdings.

Grand Rapids institutional asset management firm Red Cedar Investment Management LLC is among The 4100 Group’s present portfolio companies. The 4100 Group also owns a wealth advisory firm in Cleveland, as well as Lansing I.T. solutions company Dewpoint Inc., which has an office in Grand Rapids.

The firm has made several venture capital financings, Lancaster said. One of the most recent deals closed in December and involved participating with other investors in a $30 million growth capital raise for Palo Alto, Calif.-based Vynca Health Care that developed a palliative care platform.

The 4100 Group also has an equity investment pending in an Ann Arbor genomics company, Lancaster said, adding that the firm has a strong pipeline of investment prospects.

“The market’s great,” Lancaster said. “There’s more stuff than we can look at.”

The Gauss Surgical and Ciitizen exits follow The 4100 Group’s deployment of its initial capital allocation from Delta Dental.

Work continues to set up a new venture capital fund in excess of $100 million for which The 4100 Group will serve as the anchor limited partner. The fund will invest in life sciences companies in their early stages and could make its first investment by the end of the first quarter, Lancaster said.