Clearview Capital, a lower-middle market private equity firm in Old Greenwich, Connecticut, has completed its 100th transaction with one of its portfolio companies acquiring F1 Discovery LLC, which provides electronic discovery services to law firms and corporations.
Clearview Capital’s Xact Data will expand in the West Coast with the addition of F1, which is based in San Francisco. F1’s services include electronic data collection, processing, analysis, production and storage. Xact Data, based in Mission, Kansas, provides similar services from offices in 12 states servicing national and regional law firms, corporations and government clients.
Clearview’s 100 transactions covers more than $5 billion worth of deals that set up 25 company platforms, with Clearview exiting 15 of those. James Andersen and Calvin Neider co-founded the PE firm in 1999 after working together as managing directors at Capital Partners. Clearview specializes in acquiring lower-middle market companies, defined as those with less than $10 million Ebitda.
With the firm’s first investments, Clearview built companies 70 percent to 80 percent larger before selling them and today the goal is to double or triple their size. Yet the firm’s approach has been almost the same since it started, Andersen says. “The difference is, we’ve created a much stronger team. We have a committed ($325 million) fund now, which we didn’t when we started and over time you get better at what you do, so we’ve refined our approach,” he says.
Typical Clearview targets are family owned or entrepreneur-led, with the head of the company handling almost all of the management duties. “These are all talented people, but when you get to a certain size, if you want to continue to grow, you have to put in place systems that measure things in a consistent way,” Andersen says, along with professional IT management and typically an upgraded financial manager, such as a chief financial officer instead of a bookkeeper.
“We’re going to take the kinds of prudent risks in those businesses that entrepreneurs, when they end up having all of their eggs in one spot, they very often become risk-averse,” Andersen says. That means investing cash flow in organic and acquisition growth, and building management teams and systems that the company will need when it is two to three times larger.
Clearview’s investment approach has stood out in three particular acquisitions and exits, Andersen says. The firm acquired Compression Polymers Group of Scranton, Pennsylvania, in 2001, a company that extruded thick, flat sheets of plastic used in a variety of applications. The company had a good manufacturing business and good products, including a wood substitute, but weak sales, marketing and distribution. Clearview brought in a professional manager and a direct sales force, changed the name of the wood substitute to AZEK and built a brand around it. In the beginning, the brand produced about $4 million in annual revenues when Clearview first invested. Today it generates at least $300 million in revenue, sold for wood trim on houses, decking and railings, Andersen says. Clearview was a majority owner, then sold down to a minority stake and then exited in 2012. Compression Polymers, now CPG International, is now owned by Ares Management and the Ontario Teachers’ Pension Plan.
Clearview acquired Senior Care Centers of America, provider of day care services for seniors and adults with disabilities, backing a management buyout in 2005, when the business had Ebitda of $3.5 million and 17 centers in four states. Over 10 years, the PE firm added to the company with 15 acquisitions, increasing to 75 centers in 11 states with Ebitda of more than $20 million. Clearview sold the company to Audax Group in 2015.
In 2008, Clearview acquired All Tech Inspection of Corpus Christi, Texas, provider of inspection and testing services to refineries and petrochemical plants in the Gulf of Mexico region. Later, Clearview added Lesco, a similar business in Torrance, California, and then TC Inspection, based in San Francisco. After building a proprietary management IT system that allowed the companies to join disparate systems together and knitting together differing work cultures with a strong CEO—a former chief operating officer of Lesco and a strong chief financial officer from the outside, Clearview formed QualSpec in 2012 from the three companies—the largest independent national inspection services business in the space. All Tech had about $40 million in annual revenue when Clearview invested; QualSpec had $180 million in revenue when Clearview sold it to Team Inc., a strategic buyer, in 2015.