Solera (SLRA) Saddled with Too Much Debt

My old firm is saddled with far too much debt. Debt to Adjusted EBITDA is more than 8x pre-IPO. Debt to Operating Cash Flow is 42x. Vista Equity loaded-up Solera with debt. It will take years to dig out of this mess.

• Not much Revenue growth to speak of. Vista acquired Solera, (then ticker SLH), in 2016. Organic growth was 3-5% back then. It looks to be about the same, maybe a bit less growth now. Solera will not be growing its way out of debt.

• The S-1 offers too much detail in my view. Investors will clamor for this data each quarter and I’m not sure that I like the financial segmentation.

  • I would rather segment the financials by country, as each country used to have a country manager with P&L responsibility. I’m not sure if the company continues to run a decentralized operating model - which is THE only way to run a business. Give your people operating control and hold them accountable.

  • Decision by committee with no accountability does not work in Government, does not work in the NFL, and certainly does not work in business.

• Vista caught between a rock and a hard place. The thing of it is, Vista has to take Solera public. What other PE firm could afford to acquire Solera and saddle it with even more debt?

• Who loses? Solera loses. Good luck trying to invest for growth when your Debt-to-EBITDA ratio is north of 8x.

  

  Source: Solera S-1

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