Business North Carolina Magazine Touts “A New Frontier” in Coverage of Fund IV

May 15, 2015

Frontier Capital managing partner Richard MacLean spoke with Business North Carolina reporter Erin Dunn last month about Frontier’s $390 million Fund IV, resulting in this article in the magazine’s May issue:

A new Frontier 

Frontier Capital’s fourth fund, announced in March, raised $390 million — more than eight times as much as the $45 million in its first that launched in 1999, reflecting continued confidence of investors. Back then, the Charlotte-based private-equity firm’s investing strategy was unusual.

“There were a fair number of firms that focused on more mature manufacturing and distribution and service businesses, and early stage biotech and tech investments. There were not as many that focused on tech-enabled services companies,” says Richard Maclean, who co-founded Frontier with Andrew Lindner. “We were very fortunate that we chose that focus 15 years ago.”

The niche is larger and more crowded these days, but it still can be lucrative. It took Frontier six months to raise the money for its fourth fund. Its third fund of $250 million had an average annual internal rate of return of 16%, Frontier officials say. Most Frontier investors are institutions such as pension funds and college endowments — many that had put up money previously.

“We’ve had very strong returns, and I think you definitely have a leg up if you demonstrate that you have a specialty,” Maclean says. “It’s a little harder to have a story that turns out if you’re a middle-market generalist.”

Money devoted to private equity has mushroomed in Charlotte in recent years, led by Bank of America spinoff Ridgemont Equity Partners, which raised $735 million two years ago, and Pamlico Capital, which raised $650 million in 2013 after a spinoff from Wells Fargo. An investment in Charlotte-based data-center operator Peak 10 was a winner for Frontier’s initial fund, and North Carolina remains a key market, though most investments are out-of-state. Recent profitable investments include cloud-based event planner Lanyon in Dallas, Baltimore-based performance-measurement platform Social Solutions and Birmingham, Ala.-based business-services software developer Daxko. Frontier targets companies with $5 million to $30 million in revenue that are growing by at least 20% annually.

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