Second Fund Planned At Solera, Pioneering Female Shop

The female-led buyout shop Solera Capital LLC is showing signs of life, about 10 years after closing its first fund.

The New York firm is planning to begin fundraising for a second, likely to target $400 million to $500 million, a person with knowledge of the plan told Buyouts. Marketing is expected to begin later this year, said the person, who requested anonymity because of the sensitivity about fundraising activities. Solera Capital is said to be working with San Francisco placement agent Denning & Co. to raise the fund.

For the firm, a celebrated example of women seeking to break out in a notoriously male-dominated industry, the new fund would be its first in about a decade, the $245 million Solera Partners LP, which included commitments from the Los Angeles County Employee Retirement Association, the Oregon Public Employees Retirement System (which describes it as a vintage 2000 fund), and the New York City Comptroller’s Office, according to the Thomson One database, a product of Thomson Reuters, publisher of Buyouts. (Solera did have a $6.5 million Solera Partners (A) LP fundraise in 2008, Thomson One says.)

Solera Capital’s performance has until recently been middling at best, according to data from Oregon PERS, which reports that it made a $50 million commitment to Solera in 2000 and ultimately contributed $59.9 million to its inaugural fund. That fund has distributed $17.5 million, as of March 31. Oregon PERS put the fair market value of its remaining holdings at $65.7 million, giving the fund a 1.52x return multiple and a 6.4 percent IRR. For its overall $28.6 billion alternatives portfolio, Oregon PERS reported a 1.53x multiple and a 16.2 percent IRR.

A decade-long gap between funds is unusual in the buyouts business, as is the apparent complete exhaustion of a fund before launching a new one. Solera Capital has also experienced turnover at the top, suggesting the firm may have its work cut out for it as it returns to market. Molly F. Ashby, CEO of Solera Capital, declined requests for an interview in conjunction with this article.

All that said, the firm could get a boost as it continues harvesting some of its investments. Kroger Co., the publicly traded grocery chain, provided Solera Capital with an exit in February, paying $86 million for the portion it did not already own of The Little Clinic LLC, a network of walk-in health care centers, according to a regulatory filing. Kroger had made an initial investment in the portfolio company in 2008 and offers its services in some of its stores; Solera Capital acquired The Little Clinic’s corporate predecessor in 2005.

The firm is also anticipating a strong return on one of its oldest investments, Annie’s Homegrown Inc., a successful marketer of organic foods, according to a person familiar with the portfolio. Solera Capital made its initial investment there in August 2002, according to Thomson One.

And no one should underestimate Solera Capital’s determination. In a profile in Buyouts in April 2000, Ashby bristled at the idea of being labeled a “woman’s fund.” “I don’t feel like we have to prove ourselves any more than anybody else,” she said in an interview at the time. “It’s all about what you bring to the table. In this business, no matter who you are, you have to prove yourself every day, but it’s your experience that really counts.”

Key Departures

The Solera Capital that goes to market for the new fund will be a significantly different organization than the one that raised the last one.

Ashby is the sole remaining member of the three-partner group who founded the firm. Ashby left a 15-year career at J.P. Morgan & Co. in 1999 to become a buyouts investor as CEO of her own firm. She ended up teaming with managing partners Karen Gordon Mills, a private equity adviser at MMP Group Inc. and a former managing director and COO of the industrial group at the buyout firm E.S. Jacobs & Co., and Lori Koffman, who had been a managing director at CIBC Capital Partners and previously a senior vice president in the merchant banking group of Lehman Brothers.

But Mills departed Solera Capital in 2007 to return to MMP Group, according to the investigative Web site ProPublica, and she was appointed by President Obama in 2009 to be director of the Small Business Administration, a position she still holds. Koffman, a native of Vancouver, B.C., made a more radical career change, quitting Solera in mid-decade to pursue a five-year program in rabbinical studies in New York, according to a profile in More magazine, a Canadian women’s journal.

Solera Capital remains predominantly a female-run shop. According to the business directory Hoover’s, “The firm emphasizes its diversity, with 14 of its 17 professionals being women from backgrounds as diverse as Singapore and Ethiopia.” The firm typically invests between $10 million and $40 million in its target companies.

In the Buyouts interview in 2000, Ashby would not commit to focus the firm on specific industries, saying instead that it would invest in niches and subsectors of industries that are going through transformations driven by privatization, changing demographics, deregulation and new technologies. She did acknowledge the importance of being a specialist in such a competitive business. “We are focusing on picking the subsectors of transforming industries and building a deep knowledge, expertise and competitive edge in the areas we see going through changes.”

Indeed, the firm has developed an eclectic portfolio, with holdings in organic foods (Annie’s Homegrown Inc., a maker of organic and natural pasta meals and snacks; Annie’s Naturals Inc., a maker of natural and organic salad dressings, condiments and marinades; Fantastic Foods Inc., a maker of vegetarian convenience foods; and Consorzio Inc., a maker of dressings, marinades and oils), health care (the Little Clinic LLC, the recently exited operator of walk-in facilities in seven states from Tennessee to Arizona), magazine publishing (Latina Media Ventures LLC) and fashion (Calypso Christiane Celle, a designer of women’s and children’s lifestyle apparel, accessories and home goods).

When Mills was nominated for the SBA job in 2009, the ProPublica profile of her acted as something of a takedown of Solera Capital, describing “less-than-stellar results” including a return of less than $2 million to Oregon PERS at the time. “Most investors would not be happy with that type of performance,” said Pavel Savor, an assistant professor of finance at the University of Pennsylvania’s Wharton School, in the ProPublica piece. “Eventually, it’s almost all about the cash out.”

But the Oregon PERS March 31 numbers demonstrate the firm has produced plenty of distributions since then. And The Little Clinic exit is recent enough not to have shown up in the return numbers yet, with larger exits anticipated. More than anything, how much money Solera Capital is able to return in the months ahead will determine its success raising its second limited partnership.