The Clarity Story: Getting a premium valuation for a software and services company

 Frank Circle

Frank Pizzolato
Clarity Systems

Clarity Systems evolved from a consultancy firm to a software firm, providing the office of finance with financial planning solutions and statutory compliance software.

Our path from consulting to financial planning software not only provided a platform that enabled Clarity to grow organically, but also provided the founders with the time and capital necessary to transition the business into a leader in the financial compliance reporting space.

In December 2009, our business experienced dramatic year on year growth, as we began to approach 400 employees with offices around the world. Our financial compliance software was the market leader in its category. Our solid balance sheet as well as our legacy businesses allowed us to scale the organization and take advantage of a significant market opportunity. We ignored unsolicited interest in Clarity as we believed a formal internal process would maximize shareholder value. With our growth trajectory and market leadership position, we collectively believed that the timing was right to consider divesting some of the wealth we had created in Clarity.

Our transaction needed to be led and managed by an investment banker who had successfully led companies of our size through successful transactions.  We evaluated a cross-section of local firms, in addition to large players, but felt that Arbor was the right group to lead the process due to their emphasis on negotiation and the deal process. I was personally impressed with Arbor’s views on negotiation and strict adherence to a formal process. Over time I saw first hand the merits and value-add that Arbor brought to the table. Arbor led the debate on Clarity’s valuation, and enabled us to defend our price with evidence from financial and market research.

We started the process believing that we would divest a portion of our equity in Clarity to a private equity firm, but the final outcome was a strategic sale. In hindsight, this was an ideal path for us as the private equity firms validated our assumptions and helped us understand how the outside world saw the company. The Arbor/Clarity team attracted multiple PE as well as strategic acquirers, facilitated a competitive bidding process, and ultimately enabled us to select the best partner while maximizing value.