You’ve come to the right place…
The more planning you do, the more likely you are to have more questions. We have faced many of the same questions ourselves. To give you a helping hand as you ponder the future, we have listed some of the questions most frequently asked by owners who are considering a capital partnership.
What kind of companies do you invest in?
ClearLight has a focused approach to investing. Our ideal candidate is a high-quality, growing company within a few key sectors (specialty manufacturing / industrial technology, consumer products & services, business services, health care services, and education & training). Typically, these companies are leaders within their industries or their markets with strong management teams in place. We also partner with management teams to proactively search for and acquire companies.
What size companies does ClearLight invest in?
Generally, companies with revenues between $25 million and $250 million. The average ClearLight equity investment size is between $10 million and $50 million, but we can invest in larger transactions by working with co-investors.
How will ClearLight determine the value of my company?
Many factors go into determining an appropriate valuation, including market comparables and discounted cash flow analyses. Valuations also depend on other factors, including the size of an organization, its leadership within an industry, the attractiveness of its markets served, the quality of management, their vision and strategy, historic growth rates and growth opportunities, profit margins, barriers to entry faced by competitors, working capital intensity, and the degree of customer diversity.
How do you structure deals?
Our transaction team is experienced in structuring deals that are responsive to the needs of our shareholder and management partners. The investment may be in the form of cash, notes, stock or contingent payments (sometimes referred to as “earn-outs”) or some combination of the above. We also work with owners to develop a structure that is as tax advantageous to all parties as possible.
How long does the transaction take?
Typically, our transactions are closed within 30-90 days after reaching agreement on a letter of intent. The speed with which a transaction can be completed is impacted by a variety of circumstances and events. Many of these factors are controlled by the company: the quality of its books and records and management’s ability to provide timely and accurate information. ClearLight’s transaction team has years of experience, and they have operated their own companies, so they know what the experience is like from your vantage point and will do whatever possible to prevent you from taking your focus away from running your business during the process.
What can I expect from your team?
Because we have operated our own companies, you can expect both understanding and guidance. Our success can be attributed to our willingness to co-operate with our management teams to create positive outcomes for all parties involved. We place a premium on ethics and values, and we appreciate working with management teams who approach their businesses the same way.
Should I consider anything other than price when evaluating a potential partner?
Yes, we think so! Price is very important, but there are other very important considerations in picking a partner. Are they principled? Are they patient? Are they flexible? Do they truly understand your position? Will they be good partners? Will they add value post-close? How will they be on my Board of Directors? How will they treat my management team and loyal employees? What will happen to the business I’ve built? We encourage you to talk directly and confidentially with our management partners to hear for yourself the impressions left with those we have partnered with.
Will I be working with the same team of people during the entire transaction?
Selling your company is a very personal experience, so we understand the wisdom of assigning a dedicated team to your deal. It allows our team to work more closely with you and your management team. We typically assign a lead partner and supporting team who will provide guidance through the deal from start to finish, and these people will continue to work with the company after the transaction is completed.
What role will I play after partnering with ClearLight?
ClearLight focuses on investing with strong management teams who have a compelling vision for growth and seek to continue leading the company. Our typical partnership involves management retaining some or all of their existing ownership in the company. We welcome keeping the entire team intact after the transaction—on the other hand if a Founder wishes to reduce his or her role in the company after a transaction, we can work closely to ensure a successful transition for them.
How will the employees of my company be affected?
Talented and experienced management is crucial to the success of any business. We view managers as investment partners and feel strongly that they should be given financial incentives — including a stake in ownership — to increase the equity value of the company. Our deals include long-term equity incentives for management, together with day-to-day operational freedom as long as strategic goals are being met.
How long will ClearLight be an investor in my company?
ClearLight takes a long-term view with all of its investments. After investing in a company, we collaborate with management to maximize the potential of the business, which typically takes years. The decision of when to sell is made in close collaboration with our management partners. Typically, we are involved with a company for five to seven years.
What kind of due diligence do you undertake?
To best serve everyone’s interests, ClearLight must fully understand your business and its potential. We pride ourselves on developing a thorough understanding of your company, so that we can make a well-informed decision that is mutually beneficial to all parties and serve as effective and informed Board members following the close of the transaction. Working with you, a team of legal, accounting and other advisors, we will review your company on paper, send a team to your facilities and speak with key vendors and customers. Perhaps most importantly, we look forward to spending time with managers and key employees and getting to know each other – as we view good chemistry between management and ClearLight as essential to success.
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