Avante Mezzanine Raising First Fund

Los Angeles-based Avante Mezzanine Partners, one of a handful of women-owned private equity firms, is seeking $200 million for its debut subordinated debt vehicle, which it has been raising since March, according to sources.

Avante Mezzanine targets profitable, lower-mid-market companies with defensible niches, such as companies in business services, health care, consumer staples, security, aerospace/defense, light industrial and life sciences that generate at least $3 million in trailing EBITDA. The firm plans to make investments of $5 million to $15 million in equity and subordinated debt.

Avante Mezzanine is a rarity: a women-owned private equity firm (two-thirds of the partners are women) whose founders are especially interested in investing in other women- and minority-owned businesses. The firm isn’t confining itself to those investments, but Co-founder Jeri Harman said that those owners are even more underserved than the rest of the lower middle market because “they’ve not been historically as networked.” Harman would not comment on the fundraising.

“But I think that will change,” Harman added. “We have to work harder to find them—they are more below the radar.”

Even though the economy is still challenging, Harman thinks 2010 will be a good year for investing. She observed that there’s far more demand for capital at the senior debt level than there is supply, and that the gap between supply and demand can be filled by mezzanine funds. Another opportunity comes from the many healthy companies that have debts coming due and that will need capital to restructure their balance sheets. Harman expects refinancings to be among Avante Mezzanine’s biggest activities, along with growth financings, acquisitions and minority recapitalizations.

Also, she said, good companies should be easier to spot because they’ve already been tested in the tough economy and it’s easier to get an idea of how they’ll perform.

Harman has been an investor for 27 years with American Capital, Allied Capital and several other firms, but this is the first time she’s gone out on her own. She said she looks forward to having more control over her own destiny. “I’ve been in situations where even though my portfolio did well, the institution did not do well.”

Others principals at Avante Mezzanine include founder and Managing Partner Stephen Adamson, Partner Natasha Fox, CFO Cliff Lyon and Vice Presidents Ivelisse Rodriguez Simon and Paul Hayama. Harman said all six have either worked together or done business together over the past 10 years.