Anneliese M. Bruner
With five years of experience under its belt and more than $600 million under management, Clearlake Capital Group brings ambition and a deep respect for relationships to the NAIC member mix.
Clearlake Capital Group was founded in 2006, but the firm’s genesis was in an idea that goes back nearly 15 years. Before forming its own firm, the Clearlake’s leadership team had watched for several years as other private equity firms grew in assets under management by focusing on bigger companies.The Clearlake founders identified opportunities for smaller-end, middle-market, turnaround and specialsituation private equity, and established the firm to serve what it saw as a neglected market segment.
“At highly successful firms over the past 10 to 15 years, private equity has evolved to outsized returns with large [generic] mega-cap outcomes,” says Behdad Eghbali, one of Clearlake’s founding partners. “[We focus on] smaller, more complex transactions. This segment of the market is wholly underserved. A lot of private equity firms have the capability to make deals and source deals. We have operational expertise to grow and help businesses.”
With a target transaction size of $15 million to $75 million, and a history of operational relationships with management to restore, transform and grow companies, Clearlake is positioned to deliver on its vision.
Two of the firm’s three founding partners, Steve Chang, and Jose Feliciano, originally met while working at Goldman Sachs in the 1990s. They reunited several years later, when they both worked at Tennenbaum Capital. The two later met Eghbali during his stint with a private equity firm, Texas Pacific Group (TPG).
“Several [Clearlake] team members are from TPG and Tennenbaum,” Eghbali says, noting that their long history of working together makes for “a cohesive investment team..”
Such deep relationships at the team level, coupled with sector and product capabilities and relationships, form the basis of Clearlake’s working dynamic.Among them, Clearlake’s partners have committed more than $3 billion across more than 50 investments.“[We] did transactions with TPG and had good professional and personal relations with Behdad at TPG,” Feliciano says. “We felt comfortable in that relationship dealing with the ups and downs [over time]. It felt great to set up our own firm.”
Now five years into operation, Clearlake has more than $600 million under management in private equity and credit investing. During this period, the firm has become acquainted with the National Association of Investment Companies (NAIC) and its members, and it joined last year.
“Relationships evolved and there was commonality with many members’ missions,” Feliciano says. “ [NAIC] is an important voice for smaller and emerging private equity companies.”
He emphasizes that it is increasingly important to bring capital and attention to segments and communities that largely remain underserved, a function that NAIC can perform.
“Clearlake’s astounding success is exciting to watch,” says Samuel Boyd, NAIC president and CEO. “They’ve put the right pieces together: a talented and experienced team, a sound investment strategy and results that would make any institutional investor very happy. We’re ecstatic about having them as a member of NAIC.Our broad network of like-minded firms and institutional investors wrapped around our programming will serve Clearlake well”.
Eghbali sees NAIC membership as an important way to generate deal flow through interaction with other general and limited partners and to bring attention to smaller groups the Clearlake partners may not see otherwise.
“When we set up the firm [five] years ago, we were not aiming to be the largest, but rather a world class investment firm within a specialized investment niche,” Feliciano says. “We raised our first fund in 2006 (less than $200 million), and our second fund in 2009 (more than $400 million) with great early results.We would like to raise a third fund and believe investors will reward [strong] performance.”
Clearlake does not make any hard projections, but is confident of its approach. “We want to build the business in a responsible, methodical manner, with larger funds [targeting] business situations that fall through the cracks while maintaining our initial strategy focus on smaller and mid sized companies,” Eghbali adds.EDM