About Frontenac

• Founded: 1971

• Headquarters: Chicago, Illinois, United States

• AUM: $5bn as of 2024

• Strategy: Lower middle-market buyout, business services and industrials

• Track record: Active in GP-led secondaries since 2019, with multiple continuation vehicle structures across its Fund VII and Fund VIII portfolios

• Leadership: Managing partners include Chris Pearlman and Paul Mancuso

Frontenac is preparing to sell MCE, a portfolio company currently held in one of its continuation vehicles. The transaction would mark an exit from an asset Frontenac moved into a CV structure rather than distributing to limited partners at the original fund's scheduled close. MCE operates in the business services sector. The firm has not disclosed a sale timeline or expected valuation range.

The move surfaces a tension in the CV playbook. Continuation vehicles are marketed as patient capital structures — giving GPs time to compound value beyond a blind pool fund's natural lifespan. But secondary buyers who back CVs expect distributions within a defined window, typically 3–5 years. When GPs sell CV assets before that window closes, it can signal either strong execution or pricing pressure from LP constituencies demanding liquidity. Frontenac's timing matters: if MCE exits materially above the CV's entry valuation, it validates the structure. If pricing is flat or compressed, it raises questions about whether the asset needed the extension at all.

Recent secondary market data shows CV exits accelerating across the lower middle market. Jefferies reported a 40% increase in sub-$500m secondary transactions during 2024, with CV-held assets representing roughly one-third of that volume. Buyers are pricing these exits with tighter assumptions on hold period and MOIC than they applied to CVs launched in 2021–2022. If Frontenac achieves a premium to the CV's step-up valuation, it would stand as a counterpoint to the broader repricing trend — and a signal that selective CV structures still deliver on their original promise.

Source: Secondaries Investor