Joining the list of private equity groups that were successful in raising capital in an otherwise dry fund-raising season, Toronto-based publicly traded merchant bank Clairvest Group Inc. last month held a final close on its debut buyout fund, Clairvest Equity Partners LP, on $219 million.
The group began its fund-raising campaign about a year ago and marketed the fund to Canadian investors such as the Canada Pension Plan Investment Board and the Hospitals of Ontario Pension Plan, which have each agreed to commit $50 million over the next five years. The group used a small boutique shop in New York to market its fund in the U.S. because it wanted to “heighten its profile” here. Clairvest originally targeted $150 million to $200 million, but was able to raise $20 million over its target with the addition of $55 million that was contributed directly from Clairvest’s general partners.
However, the tough fund-raising market was not lost on either U.S. or Canadian deal shops. “It was not a lot of fun,” said Jeffrey Parr, co-chief executive officer and managing director at Clairvest.
The fund will invest in opportunities in both U.S. and Canada in industries “whose economics provide high Ebitda margins and are characterized by recurring revenues and cost-based economies of scale where we can effect the consolidation play,” Parr said.
Clairvest’s general partners have been in the business of investing their own money for 17 years, and the firm has a pool of capital of $180 million, which is 70% owned by the board and the management team.
Parr claimed that Clairvest garnered a 26% IRR on its investments that have been exited to date. “We’re all pretty happy with that so we said why don’t we invest our money where our mouth is in terms of making a very large general partner contribution to the fund, which I know is very different from the economics we see in the traditional format,” he said. “But we very strongly believe in the alignment of interests. We think people who are managing our people’s money should have their own money at risk and that the management teams that we back should [also] have their own money at risk.”
Parr added that Clairvest Equity Partners LP will target a 30% IRR.
The shop has already closed two investments to date, including an investment in Consolidated Vendors, which is an independent operator of vended products, such as snack foods, in Michigan and Illinois, and the acquisition of Recovery Bureau of America Inc. through its portfolio company Allied Global Holdings Inc., an international accounts receivable management concern.
The firm will likely complete another deal before year end, Parr said, and its goal is to invest in between one and three companies per annum.