River Associates Eyes Fund VI, Seeks Placement Agent

Executives at River Associates Investments LLC, a lower mid-market shop, are plotting their sixth buyout fund and expect to start raising money from investors in 2009, a source familiar with the firm’s strategy told Buyouts.

The Chattanooga, Tenn.-based firm has yet to hire a placement agent but would consider one with strong contacts to limited partners interested in the lower mid-market. The shop is currently investing from its fifth fund, the $110 million River V LP, raised in 2006. That fund is about 40 to 45 percent invested, our source said.

Planning for the fund is still in the early stages, but our source said he expects a target in the range of $125 million to $150 million. Firm executives feel that a gross internal rate of return of almost 35 percent over an 18-year period will attract investors.

The firm is not planning on hiring any more investment professionals for the fund.

River currently has a specialty apparel business and an outsourcing services company under of letter of intent. The firm is also seeking add-on deals for existing portfolio companies, including Coining Inc., a Saddle Brook, N.J.-based company that makes metal products used in the packaging and assembling of microelectronics; Lucent Polymers, an Evansville, Ind.-based company that produces resin compounds for the industrial, consumer and automotive markets; Roscoe Medical, a Strongsville, Ohio-based distributor of respiratory supplies and replacement parts to the home health care market; Spectrum Corp., a Selmer Tenn.-based prepares and markets specialty oils used in power lawn and garden equipment; and Wheaton Industries, a Millville, N.J.-based company that makes scientific laboratory equipment.

George Pettway, an advisory partner, founded River Associates in 1990. The firm seeks buyouts and divestitures of lower mid-market, North American-based companies in manufacturing, distribution, industrial services and retail businesses, among other industries.

The firm typically funds its deals with 40 percent to 45 percent equity. Its targets typically have adjusted operating income ranging from $2 million to $10 million.