Clearlake secures half of Fund VIII’s $15bn target, sets $16.7bn cap

Clearlake Capital raised $7.5 billion toward a $15 billion target for its eighth flagship buyout offering, as the firm eyes a final close later this year.

Initial fundraising results for Clearlake Capital Partners VIII, unveiled in 2023, were disclosed this week in Connecticut Retirement Plans and Trust Funds documents. The target was reported by Buyouts last September.

Setting a $16.7 billion hard-cap for Fund VIII, Clearlake is looking to wrap up capital raising in the fourth quarter, CRPTF documents said. The Santa Monica, California, manager declined to comment.

Mega-funds, like Clearlake’s, have had mixed success in a fundraising environment impacted by shortages of LP supply. Many institutions continue to face liquidity constraints, mostly because of weak exit markets that are contributing to fewer distributions from GPs.

The issue was identified by CRPTF as a potential risk for Clearlake. Citing $6.5 billion of unrealized value in the portfolios of Funds IV and V as of December, documents noted the process for exiting these assets “will require a significant portion of the investment team’s time.”

Mitigating against this risk is a roughly 50 percent overlap across outstanding investments in the two funds, CRPTF documents said. In addition, Clearlake expects to exit one-third of the assets in the next 12-18 months, the documents said.

Unrealized value in the portfolios of Funds IV and V owes in part to the practice of recycling capital, sources told Buyouts. The funds have already returned more than $8.5 billion, sources said, exceeding the cost basis of both vehicles.

Realizations boom

Clearlake data supplied to CRPTF highlight a recent uptick in exits. Over 2021-23, gross realizations totaled $17 billion, almost triple the volume over 2018-20. The latest sale, announced in January, involved Janus, a turn-key self-storage, commercial and industrial building solutions provider.

A growing pace of realizations may help explain Clearlake’s track record. Funds II through VII were earning a 1.7x net multiple and a 28.7 percent net IRR as of December, according to CRPTF documents.

Clearlake is led by managing partners José E. Feliciano and Behdad Eghbali, who co-founded it in 2006. The flagship strategy emphasizes control investing in mostly North American mid-sized to large companies with values of $1 billion-$3 billion and operating in software and technology, energy and industrials, and food and consumer services sectors.

The strategy is all-weather in nature, with an ability to back high-growth businesses or those undergoing complex financial, operational or structural change. Depending on the cycle, Clearlake will invest in multiple deal types, including traditional buyouts, corporate carve-outs and special situations.

Fund VIII is expected to make 18-22 platform investments, with check sizes of $500 million to greater than $1 billion, CRPTF documents said.

Like its peer group, Clearlake is tapping into a rich vein of carve-out and public-to-private opportunities. This month, the firm and Francisco Partners said they struck a deal to acquire the software integrity unit of Synopsys for $2.1 billion.

And in March, Clearlake and Insight Partners completed a $4.4 billion take-private acquisition of Alteryx, an AI-enabled data analytics and automation solutions provider.