Two prominent Washington investment firms have placed a bet of roughly $150 million on the growing litigiousness of American society.
The Carlyle Group bought a majority stake in LDiscovery, a Tysons Corner, Va., firm specializing in law firm technology and services that will be chaired by Daniel F. Akerson, the former chief executive of General Motors and former head of Carlyle’s flagship global buyout group.
Carlyle has teamed in the acquisition with Revolution Growth, the local venture-capital firm led by former AOL moguls Steve Case and Ted Leonsis.
The acquisition, which occurred late last month and was to be announced Wednesday, reunites a pair of local dealmakers, Will Darman of Carlyle and Evan Morgan, now with Revolution, who did some of their first transactions together at Carlyle. It also pairs Akerson with a fellow graduate of the U.S. Naval Academy, LDiscovery founder Christopher Weiler.
Carlyle owns well over half of LDiscovery, with Revolution and LDiscovery owning the rest.
Among the services it provides, LDiscovery helps law firms compile and manage the information they need for court cases — be it records, spreadsheets, tweets, emails, even scribbles on paper napkins — into one electronically searchable database. In legal circles, the field is known as electronic discovery.
“It’s an industry that is growing really fast, and this company is growing at a rate that’s faster,” said Darman, a Carlyle managing director and son of the late Richard Darman, who held senior positions in the presidential administrations of Ronald Reagan and George H.W. Bush.
LDiscovery is profitable on annual revenue of about $100 million, say sources familiar with the deal, who spoke on the condition of anonymity because the numbers have not been released.
Former Carlyle dealmaker Morgan, now a partner at Revolution Growth, brought the LDiscovery deal to Carlyle in May. Morgan said he met Weiler during the Ernst & Young entrepreneur of the year selection process in 2014. Weiler has been in the data collection industry for two decades.
“I hunted [Weiler] down over a two-year period, and when he was ready to do something, I called Darman and said, ‘Let’s put the band back together, with Chris Weiler the drummer,’ ” Morgan said.
Weiler, 53, who was a football star at Annapolis and is the offensive coordinator at Lake Braddock Secondary School, said he has two plans for the money.
“Certainly we will look at acquisitions and be a little more aggressive and look to buy companies in geographic areas that we are not currently in,” he said. The company will also invest in its technology.
Carlyle’s investment was made by its Carlyle Equity Opportunity Fund II. The fund buys midsize companies such as LDiscovery by writing checks from $100 million to $200 million.
Carlyle is expected to use LDiscovery as a vehicle through which it can acquire similar firms in the fragmented industry.
“There are lots and lots of companies, which makes our investment here an interesting platform to go out and do acquisitions,” Darman said.
In addition to Tysons Corner, LDiscovery has offices in Chicago; Philadelphia; New York; New Jersey; San Francisco; Pittsburgh; Austin; Atlanta; Fort Lauderdale, Fla.; and London.