Update: It has previously been officially reported that Cove Hill was a minority investor in NetDocuments. We are informed that is not the case and have removed the earlier reference to Cove Hill being a minority investor
New York growth investment company Warburg Pincus has acquired NetDocuments from Clearlake Capital Group, we can reveal, joining incumbent investor Cove Hill, which has retained its existing stake in the company.
Clearlake acquired NetDocuments in 2017 and speaking to Legal IT Insider, NetDocuments’ CEO Josh Baxter said: “Clearlake’s typical investment horizon is between three and five years and we were in the middle of that range,” adding: “This time we were interested in finding a longer-term investor.”
Cove Hill has a 17-year fund and Warburg, which counts BEA Systems, UGS, Neustar, CrowdStrike, Avalara and Ziggo within its technology portfolio, has acquired NetDocuments out of a 10-year fund.
Baxter said of the new investor: “Their focus is to find best of breed vertical software applications and support them, and we line up well with the strategy.”
According to Baxter the latest acquisition, which is subject to regulatory approval, was underpinned by NetDocuments’ 25% year-on-year growth trajectory and further growth potential. He said: “They see that our platform is best positioned to be the platform for legal professionals globally. Beyond that, they see our amazing greenfield opportunity in a number of markets, whether that be small-to-medium law firms; government; or corporate legal, where we continue to win and take market segment.”
According to one source close to the deal, NetDocuments was valued at a staggering $1.4bn, although Baxter declined to comment on that figure. We understand that this is Warburg’s first acquisition in the legal tech space.
NetDocuments is just shy of tripling the value of the business since Clearlake acquired it in 2017. While it has in recent years targeted prestigious large law wins, much of its recent growth has come from the relatively untapped small to medium sized law firm market, which looks to be where its future strategic course is set. Baxter said: “Our intention is to continue on the path we’re on today and to continue to lead innovation. The good news is that whether you are a massive law firm or one with five to 10 lawyers, you have the same need for content management and collaboration.”
One change of direction that we are likely to see under the new partnership is an increase in acquisitions. Baxter said: “The thing we’re going to be more active with is M&A. We’ve been conservative to date because we wanted to take advantage of the amazing growth opportunity in front of us. Now we’re going to look at the things that accelerate the productivity of legal professionals and strengthen their ability to conduct the business of law and the work of law.”
Baxter confirmed that Warburg and Cove Hill are behind that new acquisitive strategy, commenting: “Warburg Pincus and Cove Hill are going to be great finance partners, and as we have M&A opportunities, they will support us in executing that.”
He added: “What we have in Warburg Pincus and Cove Hill are partners that share my vision of NetDocuments becoming the next Salesforce.com of legal, and their timing aligns with what we’re going to be doing in the next five to seven years.”
In a statement Andrew Park, managing director of Warburg said: “NetDocuments effectively serves as the platform of productivity for the legal community and is uniquely grounded in its commitment to customer service. The Company’s strong track record, paired with a talented leadership team, has positioned it well for the accelerating shift to cloud.”
To take a look at Warburg’s other investments see:
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