Mary Tolan hasn't wasted much time figuring out her next act.
A year after being replaced as CEO of Accretive Health
, she's raising a $500 million private-equity fund called Chicago Pacific Founders focused on healthcare investments.
It's a splashy debut effort in an industry that's attracting lots of interest. That land rush may make it harder to produce king-size returns as investors bid against one another for deals. But it also signals the opportunities to be had as a graying population, the Affordable Care Act
and cost-cutting pressures reshape roughly a sixth of the entire U.S. economy.
“There are people with nowhere near the track records of this group who are able to raise funds,” says Rick Herbst, who oversees the life-sciences practice at Chicago-based Sikich LLP's investment banking unit. “There is a lot of competition for deals.”
Tolan, 53, spent two decades as an Accenture Ltd. retail consultant and strategist before co-founding Accretive in 2003 as a billing consultant to hospitals and physicians groups. Though she left the company under a cloud—its stock cratered after Accretive was accused in 2012 of strong-arming patients for bill payments—she seems to have had little trouble assembling an A-list of talent for her new venture.
Chicago Pacific Founders' managing partner is Larry Leisure, a former Accenture colleague and healthcare consultant who is an adviser to legendary Silicon Valley venture fund Kleiner Perkins Caufield & Byers in Menlo Park, Calif. Its operating partner is John Rijos, who previously was chief operating officer of Brentwood, Tenn.-based Brookdale Senior Living, one of the nation's largest operators of assisted-living facilities. Tolan, a trustee of the University of Chicago's Booth School of Business, is chairman.
Tolan declines interview requests, but in a statement she describes Chicago Pacific Founders as “an investment firm based in Chicago and San Francisco focused on innovative health care services and senior living.”
Investment opportunities, according to the LinkedIn profile of a fund employee, include “leading healthcare providers, post-acute care, next-generation health plans, elder-care businesses and the technology companies that underpin transformed care, adding innovation capital, active management and strategic partnering opportunities.”
It's not clear how much money Tolan and her partners have raised or when they will make their first investment.
Tolan's path to private equity has been well-worn by ex-CEOs. After Chris Galvin was forced out as CEO of Motorola, he launched Harrison Street Real Estate Capital LLC in Chicago, which has raised $3.4 billion to invest in real estate, including medical offices, senior housing, student housing and self-storage. Glen Tullman, booted as CEO of Allscripts Healthcare Solutions Corp. in 2012, now invests in health care and education technology through his 7 Wire Ventures fund.
“She's a rare health care executive who's worked effectively in a corporate environment and at the same time understands what it's like to start a business from scratch,” says Nina Nashif, CEO of Healthbox LLC, a Chicago incubator for health care startups, who calls Tolan a mentor. Nashif says, “That's key.”
Nonetheless, Tolan must prove she can spot potential winners before others do. In Chicago alone, Chicago Pacific Founders could be competing with some of the biggest players in private equity, such as GTCR LLC, as well as Flexpoint Ford LLC, Water Street Healthcare Partners and Roundtable Healthcare Management
Tolan and Chicago Pacific Founders are part of another trend, says David Loucks, CEO of Northbrook-based investment banking firm Healthios Capital Markets LLC. “Those funding health care today are different from those who funded it in the past,” he says. “There are as many family offices funding (innovation) as institutions, individuals like Bill Gates. At the end of the day, they want to be known for something more than what they've already done.”
Tolan grew Accretive to more than $800 million in sales and nearly 3,000 employees. She resigned as chairman in November. The company, which has said it must restate its financial results going back to 2011, was delisted by the New York Stock Exchange last month."Ex-Accretive CEO Tolan has a big, new venture" originally appeared on the website of Crain's Chicago Business.