Clearlake rolls out third opportunities fund, with $1.5bn target

Clearlake Capital Group, which is marketing its latest flagship buyout vehicle, unveiled a third non-control special situations offering targeted to bring in $1.5 billion.

The amount, confirmed by sources, was disclosed in a report issued last month by Pennsylvania State Employees’ Retirement System. PA SERS signed up to commit $75 million to Clearlake Opportunities Partners III.

The offering is one of several Clearlake fund initiatives of late, among them the private equity firm’s seventh flagship. Clearlake Capital Partners VII, launched roughly a year after the 2020 close of Fund VI at $7 billion-plus, is seeking $10 billion.

Both the flagship fund and the third opportunities fund are encountering strong demand from limited partners, sources told Buyouts. The two pools are together expected to secure $14 billion to $15 billion in committed capital, they said, putting them $2.5 billion to $3.5 billion above their combined targets.

Clearlake was until recently also marketing Clearlake Flagship Plus Partners, set up to invest alongside the flagship and opportunities funds and also source dealflow not covered by these vehicles. Sources said it wrapped up last year at more than $1 billion.

Clearlake declined to provide a comment on this story.

Clearlake Opportunities Partners III will maintain the strategy of its predecessor, sources said. Closed in 2019 at $1.4 billion, Fund II essentially takes Clearlake’s control-oriented special situations approach and applies it to non-control deals involving mid-market companies, many of them financially or operationally challenged.

Similarly, opportunities are sourced in Clearlake’s core sectors of specialization: software and tech-enabled services, energy and industrials and consumer.

Fund II aimed to make up to 25 investments in mostly North American businesses valued at $100 million to $2 billion, according to a 2019 report issued by Pennsylvania Public School Employees’ Retirement System. Clearlake check sizes were expected to range from $25 million to $75 million.

Like Fund II, the third fund will emphasize flexible, all-weather investments that typically utilize structured equity, opportunistic credit and reorganization equity instruments. Investing across the capital structure, it will look to create downside protection while allowing for equity upside potential.

The management team for Fund III is the same as for all Clearlake funds, the sources said. It will be led by managing partners José E. Feliciano and Behdad Eghbali, the founders who launched the firm in 2006. Other senior team members are partners and managing directors James Pade, Colin Leonard and Prashant Mehrotra.

Clearlake’s debut opportunities fund, closed in 2016 at $600 million, was as of March earning a multiple of 1.3x and a net IRR of 13.7 percent, California Public Employees’ Retirement System reported.

Fund II was generating a multiple of 1.1x and a net IRR of 14.3 percent as of June 2020, according to a Connecticut Retirement Plans and Trust Funds report.

With offices in Santa Monica, California, and Dallas, Clearlake oversees more than $43 billion in managed assets.