Churchill Asset Management was a co-lead investor in its fourth direct investment alongside Frontenac in a continuation vehicle of an undisclosed size that was an oversubscribed secondary market transaction in Frontenac’s portfolio company Motion & Control Enterprises (MCE).
Churchill is also an investor in Frontenac’s flagship private equity funds that invest lower middle market buyout transactions in the consumer, industrial and services industries.
MCE is an industrial distributor and services provider of highly engineered, full lifecycle fluid, flow, automation, and air solutions. Frontenac acquired MCE in 2018 in partnership with CEO1ST executive Charley Hale. Together, Frontenac and Hale have completed 10 acquisitions and grown EBITDA by more than 15x.
“The market MCE serves is benefitting from robust, long-term industry tailwinds and remains highly fragmented, presenting a compelling opportunity for growth,” said Nick Lawler, head of secondaries at Churchill. “With this continuation vehicle transaction, we are pleased to support Frontenac’s ongoing investment in MCE, enabling the acceleration of organic growth initiatives and the pursuit of additional attractive M&A opportunities.”
Churchill launched its secondaries strategy in 2022 with the hire of Lawler to lead the strategy. In the last twelve months, Churchill has invested over $300 million in secondary transactions across GP-led and LP-led transaction structures with a core focus on the U.S. middle market. Churchill has $46 billion of committed capital invested across first lien, unitranche, second lien and mezzanine debt, in addition to equity co-investments, secondary solutions and private equity fund commitments.
Frontenac Managing Partner Ron Kuehl said that Churchill has supported its funds and several portfolio companies with a range of solutions across the capital structure. “By continuously enhancing its capabilities to proactively address the dynamic needs of the industry, Churchill remains a reliable and forward-thinking partner,” added Kuehl. “This secondary transaction is a clear testament to our strong collaboration, in this case supporting an excellent company with exciting growth potential, even amid the uncertainties of the current market environment.”
Jason Strife at Churchill said that the firm was excited about the opportunities in the continuation vehicle segment of the secondary market. The transactions allow sponsors to generate liquidity for existing investors, maintain ownership of top performing companies and raise incremental follow-on capital in support of future growth, he said.
“Further compelling is the relative scarcity of secondary capital available in the market today, resulting in a significant flight to quality both in terms of franchise assets and top-tier sponsors pursuing continuation vehicles,” Strife added.