The Charlotte, N.C.-based PE firm announced Monday the final close for Frontier Fund III LP, which had a $200 million target. Frontier’s second fund raised $115 million in 2006, which itself was 2.5 times larger than the $45 million collected by the PE firm in 2000.
Frontier began marketing for Fund III in late 2010, says Richard Maclean, a Frontier managing partner.
The fundraising market grew even more crowded as Frontier near the end of their efforts, he says. Many PE firms sat out fundraising during the early part of 2011 and “jumped in” toward the end of the year as the market improved, he says. “It’s probably even more crowded today,” he says.
“We had great support from our existing investors,” Maclean says. “It took longer but our LPs couldn’t be happier with the way we ended up.”
New investors for Frontier’s fund III include Adams Street Partners, Teacher Retirement System of Texas, the Employees Retirement System of Texas, Munich Private Equity and Credit Suisse.
Lazard, led by Holcombe Green, was Frontier’s placement agent. DLA Piper was legal counsel.
Longer fundraising is only one recent trend firms out marketing are encountering. Another is increased investor caution. Last year, many PE firms told me that new LPs were reluctant to invest until a fund had hit a first close. That trend is continuing, Maclean says, and some LPs are going a step further. They want firms to actually do some deals before they invest, Mclean says. “They want to see you up and running and in business actually making investments,” he says.
Frontier has already done three deals–Celergo, Healthx and eVerifile– from its third fund and has deployed $50 million.
A growth investor, Frontier typically invests in profitable companies with EBITDA of $1 million or more and at least $5 million in revenue. The firm focuses on software and technology-enabled business services. Frontier usually invests $5 million to $25 million equity per deal and will take minority positions, Maclean says.
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