Special Situations Shop Closes Fund

Firm: Clearlake Capital Group LP

Fund: Clearlake Capital Partners II LP

Target: $350 million, with a cap of $400 million

Amount Raised: $410 million

Legal Adviser: Paul, Weiss, Rifkind, Wharton & Garrison LLP

Clearlake Capital Group LP has closed its second fund earmarked for investments in special situations, including companies undergoing complex operational changes, with more than $410 million in commitments.

The firm began marketing Clearlake Capital Partners II LP in 2008. According to a source with knowledge of the situation, the firm had initially thought about a hard cap of $500 million until “the world changed,” and the target was revised to $350 million—still an adequate amount for the firm to execute its strategy with. A cap of $400 million was negotiated with LPs as it became clear the fund was going to be oversubscribed, according to the source. “They are very pleased with raising over $410 million and got approvals from LPs to exceed the cap.”

The New York-based firm has earmarked the capital for investments in special situations, which includes companies undergoing complex financial, operational or structural changes in the business services, communications, consumer, health care, industrial and technology sectors. It capitalizes on such opportunities through corporate divestitures, recapitalizations, buyouts, restructurings, turnarounds and minority equity investments in small and mid-size North American companies.

Backers include public and corporate pension funds, financial institutions, insurance companies, endowments and foundations, funds of funds and family offices. In November, the shop received a $15 million commitment from the New York State Common Retirement Fund. The Teachers’ Retirement System of the State of Illinois gave Clearlake Capital Partners a $25 million slug for Fund II in May. And the Los Angeles Fire and Police Pensions committed $10 million in 2008.

Clearlake continues to manage and invest Clearlake Capital Partners I LP, which closed in 2006 with $180 million.

Steven Chang, Behdad Eghbali and José Feliciano founded the firm in 2006. Chang and Feliciano previously worked together at Tennenbaum Capital Partners, a California-based distressed investment buyout firm, and Eghbali formerly worked at TPG.

Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel in the formation of the fund.