When father and son Howard and David Solomon founded their family office after selling Forest Laboratories, they named it after their dog, Hildred.
Howard sold the pharma company to corporate Actavis for an enterprise value of $28 billion. “I retired as chief executive of Forest Laboratories, which I had been running for 30 years, prematurely; I was only 85 years old,” he chuckles.
He had grown what was a small pharmaceutical company with one product and an enterprise value of a few million dollars, to one with over $4 billion in revenue and a diversified product line.
The duo launched Hildred Capital Partners to use the family capital, network of contacts and operational knowledge they gained from running a pharma company. Its aim is to find investment opportunities in the evolution of the healthcare sector fuelled by Obamacare, continuing consolidation, pressure on pricing and cost, and technological innovation.
One of the benefits of investing as a family office is flexibility. Hildred, unlike a private equity GP investing from a 10-year fund, is not constrained by strategy, cheque size or holding period.
“That flexibility can make you an appealing investor for a lot of companies,” David says. “For us, we can be patient and wait until we find the deals we love.”
The firm has therefore been able to access a broad range of opportunities, in which it will typically invest between $5 million and $50 million.
Of the 10 transactions the family office has done in the past two years, roughly a third had Hildred as the sole investor, another third saw the firm invest with other family offices, and the rest were co-investments with private equity funds.
If the duo sees a compelling opportunity requiring a cheque beyond its range, they join forces with co-investors. Last month, Hildred partnered with Signet Healthcare Partners, Athyrium Capital Management and Pharmascience to invest $93 million in Pharmaceutics International.
The team is also involved in a traditional private equity structure, helping an outside business partner establish his own fund. Hildred is providing access to its investment team and back office, and, in exchange, is receiving a piece of the general partnership.
The firm is also actively considering raising third-party capital, although the pair decline to comment on any specific plans.
“We've built a very strong team here and we're seeing interesting dealflow, so the idea of leveraging that with outside capital is interesting,” David says. “We'd like to do that over the next year or so.
“We're not going to do that unless we're highly confident what we can do is going to create substantial value for other investors, but we certainly could leverage what we're doing here.”