Frontenac Adjourns Investment In Trial Consultant

Target: TrialGraphix

Price: Undisclosed

Seller: Frontenac Co.; Baird Capital Partners

Buyer: Kroll

Financial Advisor: Seller: William Blair & Co.

Legal Counsel: Seller: Kirkland & Ellis

With a strategic suitor circling, Chicago LBO firm Frontenac Co. last month defied its typical hold period and sold litigation-services firm TrialGraphix to Kroll, a division of Marsh & McLennan Cos., less than three years after buying the company.

Neither side disclosed terms of the deal, although Troy Noard, a Frontenac managing director, said that robust growth propelled the exit to a strong cash-on-cash multiple and a healthy IRR. The return went to Frontenac VIII, a $560 million vehicle closed in 2000. The sale also provided an exit for Chicago-based Baird Capital Partners, which held a large, though unspecified, minority stake in TrialGraphix.

Frontenac typically holds companies for at least four years, but Kroll, attracted by TrialGraphix’s 30 percent compounded annual EBITDA growth, offered TrialGraphix a speedy, all-cash close, Noard said.

The firm bought TrialGraphix in December 2004, following an extended courtship with management. Noard said the acquisition gave the company’s founder a dose of liquidity while also removing some of the risk for an entrepreneur whose net worth was bound up in the business. With risk transferred to Frontenac, TrialGraphix could embark on a more ambitious expansion into new cities and new offerings.

“They were dominant in the markets they were in,” Noard said. Geographic expansion “was in their plans—they just didn’t know when. It’s a difficult decision when it’s all on your watch and all on your dime.”

When Frontenac took control of TrialGraphix, the Miami-based company operated in its home town as well as New York, Chicago and Los Angeles. Within a few years, it opened offices in Houston and Philadelphia. Frontenac also recruited a CFO who otherwise wouldn’t have been available to a company of TrialGraphix’s size, Noard said.

TrialGraphix provides attorneys with an array of audio-visual and computer products and services that allow trial lawyers to put on what Noard described as a “sophisticated show for jurors.” Increasingly, local, state and federal governments have made significant investments in courtroom technology, and attorneys have responded by staging elaborate, computer-driven re-enactments of crime scenes and medical procedures to animate cases for juries.

At the same time, other areas of so-called litigation support have been growing strongly. In addition to its document work, for example, TrialGraphix assists attorneys with selecting juries and conducting focus groups before trial to better prepare for the courtroom. The phenomenon of e-discovery—the time-consuming and expensive process of culling through servers of e-mails and instant messages for case-related documents—has become a business unto itself. Under Frontenac’s ownership, TrialGraphix added e-discovery to its menu of options for clients.

“All the macro trends in this industry were pointing in the right direction,” Noard said of Frontenac’s decision to buy TrialGraphix.—J.H.