Churchill and 50 South lead on Frontenac’s single-asset CV

Churchill Asset Management and 50 South Capital have co-led on a single-asset continuation fund for Chicago-based private equity firm Frontenac, marking a first for the latter firm.

Frontenac moved Motion & Control Enterprises – a distributor and services provider of technical fluid power, automation, flow control, compressed air and lubrication products – into a new vehicle in an oversubscribed transaction, according to a statement.

Evercore advised on the transaction.

The asset was previously housed in Frontenac XI Private Capital, managing partner Ron Kuehl told Secondaries Investor. The $325 million vehicle closed in October 2017, according to data from affiliate title Private Equity International.

The majority of the transaction’s backers were financial institutions, Kuehl said in a statement following the interview.

MCE was “a particularly strong fit to pursue a continuation vehicle”, Kuehl said. The transaction allowed the firm to return liquidity to investors in a difficult exit market while marking a successful deal for all involved.

Nick Lawler, head of secondaries at Churchill, said in a statement that the market MCE serves “is benefiting from robust, long-term industry tailwinds and remains highly fragmented, presenting a compelling opportunity for growth”.

Churchill added it was the fourth direct investment it had made alongside Frontenac across its platform.

The transaction took “a little longer than what we would have anticipated” given the “tightness of capital availability, as well as scrutiny of due diligence, with the secondary investors being even more thorough given those capital constraints”, Kuehl said.

LP sell rates fell at the top of what Frontenac benchmarked, “which I think is as expected, and suffice it to say, investors were excited to receive liquidity”, he added.

The transaction also includes follow-on capital, which Frontenac will use to source further and larger add-on acquisition opportunities for the business.

MCE has recently closed its 11th add-on acquisition, bolting on an automation business – a core area of focus for MCE, Kuehl said. It also has three businesses under letter of intent and a pipeline that is “equivalent to the size of the business today”.

Companies operating in the industrials sector made up 16 percent of the $16 billion of GP-led activity in the first half of the year, down slightly from the same period a year ago when these companies made up 18 percent of activity, according to Evercore’s H1 2023 Secondary Market Survey Results.