Chicago-based Frontenac Company, a lower middle market firm, has closed its tenth vehicle on the $250 million target, PEI has learnt. The fund launched just 18 months ago with investor backing from current advisory board members, LPs that were previous investors, and new institutional investors.
LPs in the fund include Northwestern Mutual Capital, LLC, Hartford Investment Management Company and Hancock Capital Management, LLC, according to sources familiar with the fund.
The fund — Frontenac X Private Capital – is off to a record start already completing two investments and returning more than 50 percent of the fund’s invested capital to date through dividend recapitalizations at both companies.
“Investors saw that we were able to deliver. They’ve paid careful attention to the strategy – our deal sourcing process brought investors back for this fund,” Paul Carbery, managing partner at Frontenac tells PEI. “We’re targeting ten companies for this fund, across the US.”
The first investment from Frontenac X Private Capital – Portfolio General Management Group is a provider of outsourced financial services to automobile dealerships. The company specializes in extended warranty and vehicle service contract programs and is headquartered in Irvine, California. Frontenac completed a dividend recapitalization in February 2014. The fund’s second investment – Ohio Transmission Corporation is an industrial distributor and expert technical support provider for industrial pumps, fluid power, finishing, power transmission, bearings and electrical applications serving a wide range of end-markets from 20 branch locations. The company completed an accretive add-on acquisition earlier this year and concluded its dividend recapitalization in July 2014.
Frontenac Company focuses on investing in lower middle market buyout transactions in the business services, industrial, food and healthcare sectors. Carbery says the typical bite size is $25 million, the fund will also consider a limited number of co-investments.
“We’re focused on companies that are family or founder owned,” Carbery adds.
M2O Private Fund Advisors LLC advised on the formation and placement of the fund, and Winston and Strawn, LLP served as legal counsel.