Steve O’Leary and Tim Conway of Clarus Capital sat down with Monitor to discuss the launch of Clarus Capital in what the duo calls an “alignment of the stars” as well as where they came from, what they have built and where Clarus Capital is heading next.
Ian Koplin, Editor, Monitor
Steve O’Leary and Tim Conway, now CEO/president and chairman of Clarus Capital, respectively, began their business partnership at NewStar Financial, where Conway was founder and CEO and O’Leary was the architect of the company’s equipment finance business.
O’Leary enjoyed his time as an independent with NewStar and wanted to return to that focus after spending several subsequent years in a regulated environment. Crediting this realization as partial inspiration for Clarus Capital, O’Leary says he saw a healthy alignment of styles between his own, Conway’s and those of Mike Eisenstein, who is now CFO of Clarus Capital.
“We were able to put together a talented, cohesive team of like-minded people with diverse yet very complementary experience,” O’Leary says.
Given current market conditions and continued retraction by traditional banks, Clarus Capital is bullish about the opportunities for itself and other independents. The company is planning to focus its operations on the non-investment grade market, which requires a deep and experienced team.
Building the Right Team
With discussions starting in 2020, an approximately 18-month process of planning, recruiting and executing led to the launch of Clarus Capital, a feat Conway says happened seamlessly.
“I know this team, led by Steve and Mike, is well positioned to compete in these sectors,” Conway said. “I’ve been in the fixed income and alternative credit markets for most of my career, and I believe there’s a compelling opportunity in this niche.”
Focusing on capital-expenditure-intensive businesses as its go-to-market strategy, Clarus Capital is looking to support both sponsored and non-sponsored leveraged companies.
“Clarus Capital is middle-market and large corporate focused. So, we’re looking at non-investment grade businesses where we won’t necessarily [have] to compete head-to-head with the banks. We finance mission critical assets, essential-use equipment across a broad range of industries. We’re not industry specific, we’re not equipment specific — we’re agnostic when it comes to both, but the team has decades of applicable experience,” O’Leary says.
Conway says a national network of experienced direct originators, plus a veteran capital markets team, will allow Clarus Capital to generate a broad set of investment opportunities. On the direct side, the team recruited Matt Worman and Jarrod Hicks, experienced bankers who understand Clarus Capital’s investment style and strategy, with plans to continue building out the team in direct originations. On the indirect side, the firm hired Chris Swanton, whom the team has known and collaborated with for decades.
“Initially, everyone that we recruited joined the firm,” O’Leary says. “The senior management team is in place, the investment management team is actively underwriting and we will continue adding to the group in 2022 as we grow.”
Bringing the Platform to Life
With the launch of Clarus Capital in late 2021 came the plan for an industry-leading, flexible and responsible platform on which it would operate. O’Leary explains preliminary infrastructure was key to becoming responsive.
“We wanted to make sure that before we went to market we had a well-built platform in place,” O’Leary says. “We wanted to have the right investment management team, which is what we call our ‘credit’ organization, and have seasoned professionals in key roles. Talent that fuses experience in leverage finance and equipment finance so that we can be responsive and decisive. We have a deep investment team led by our chief credit officer, Jeff Greene, with experience in underwriting as well as structuring transactions around the specific needs of clients in this space.”
“This platform comprises a valuable combination of traditional leasing expertise with a strong leverage finance underwriting track record. It’s unique in the sense that we have such a deep team of non-investment grade credit professionals, many of whom are experienced in the cash flow lending business,” Conway says.
On the ground floor of Clarus Capital’s launch was private equity firm BharCap, which was founded by Bharath Srikrishnan, who was also involved in the founding of NewStar. O’Leary and Conway agree private equity is an opportune capital choice for backing an independent. O’Leary believes a firm that has an understanding of Clarus Capital’s mission and experience in its markets will provide the flexibility necessary to scale the business, making BharCap an ideal strategic partner since it is a sophisticated backer that will help Clarus Capital grow and scale for years to come.
As O’Leary and Conway point out, the Clarus Capital team has years of experience across the equipment finance, leverage finance and securitization markets, the latter of which is likely to be an important part of how the company finances itself.
Clarus Capital’s team also benefits from an existing customer base, one the team has done repeat business with and one the company believes will translate quickly into new business opportunities. O’Leary says his team is well-known in the private equity space and he plans to use that recognition to generate opportunities with sponsor-backed businesses. Conway agrees, saying Clarus Capital’s long-standing track record of consistently closing business with private equity portfolio companies is a leg up for the nascent firm.
“This large and growing customer base knows us and appreciates our ability to deliver. When we say we’re going to deliver, we will,” Conway says.
Bringing it All Together
Clarus has hit the ground running, building its team and thoughtfully and selectively scaling its portfolio in its first few months of operation. Since inception, Clarus Capital has originated more than $700 million of opportunities, closed more than $50 million in business and is well on its way to greater scale with a solid pipeline.
“In 2022, our plan is to originate in excess of $250 million in volume. We also plan to return to the asset-backed securities market as a programmatic issuer of equipment finance-backed securitizations, a process that Mike Eisenstein will lead,” O’Leary says.
“I know that we can add value in these markets and that makes this opportunity very exciting,” Conway says.
While O’Leary and Conway are seasoned market veterans, they continue to surround themselves with a diverse team of experienced professionals.
“Some people sit at the top of organizations and think they know every aspect of the business,” O’Leary says. “Personally, I’m learning every day because we’ve surrounded ourselves with some of the best people I’ve ever worked with.”
Ian Koplin is an editor of Monitor. Rita E. Garwood, editor in chief, interviewed Steve O’Leary and Tim Conway for this article.
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