The Riverside Company has closed its fifth general fund with $1.17 billion in capital commitments, compared to a $900 million target. The fund will focus on investments in North American companies with EBITDA between $5 million and $15 million. Limited partners include the State of Oregon, Meketa Investment Group, the Illinois State Board of Investment, IAM National Pension Fund, Sentry Insurance, Mass Mutual and the University of Washington.
Thanks to significant support from existing and new investors, The Riverside Company has closed its latest fund well above target. Riverside Capital Appreciation Fund V (“RCAF V”) had targeted $900 million when it launched in March 2008. On May 29, 2009 it closed on $1.17 billion – 30% above target and 56% above the total raised in 2003 for the RCAF ’03 vintage.
The Riverside Capital Appreciation Fund family, which is Riverside’s original product, adheres to the core principles on which the firm was founded 21 years ago. It invests in healthy North American-based companies with EBITDA between $5 million and $15 million. Riverside’s strategy is straightforward; it builds these small companies into mid-market competitors by doubling or tripling EBITDA through add-on acquisitions and organic growth. The firm helps great management teams grow their little companies by using its dedicated operating and origination teams and the talents of world-class investment professionals. The final step in the strategy is to sell the formerly small companies at the higher level of earnings and enhanced multiples that larger and stronger companies demand. The RCAF team’s focus and professionalism has proven extremely effective – through March 31, 2009, the gross IRR on all exited RCAF deals was 57.7%, with a gross cash-on-cash return of 3.2x. Thomson Venture Economics ranks seven of the firm’s nine mature vintages as top quartile performers on a net cash-on-cash basis as of December 31, 2008.
Today, Riverside employs its strategy across four fund families: RCAF; Riverside Europe Fund, which buys European-based companies with under €15 million in EBITDA; Riverside Micro-Cap Fund, which buys North American-based companies with under $5 million in EBITDA; and Riverside Asia Fund, which buys companies with under $10 million in EBITDA in developed Asia. This approach has earned the firm’s investors consistently superior returns across 46 exits in Riverside’s history.
With over $3 billion in capital under management, Riverside targets companies with enterprise values below $150 million. Since 2008, its average platform enterprise value has been $40 million, and as such, Riverside tends to compete with much smaller regional or industry-specific firms. Like these firms, Riverside employs local nationals in each country who fully understand and engage in local markets. But unlike these firms, Riverside brings extensive global resources to small company investing. Riverside is one of the world’s most active private equity firms, with 185 employees in 18 offices on three continents, who together manage a portfolio of 68 companies. Riverside maintains dedicated originating, transacting and operating teams, employing institutional-quality resources not typically available to its small-market competitors.
“This is the worst fundraising market since dinosaurs roamed the earth,” said Stewart Kohl, Riverside Co-CEO. “But investors voted with their dollars in favor of our simple and proven value creation strategy coupled with our demonstrated execution. While over the past five years many private equity firms competed to do bigger and more highly leveraged deals, we stuck to our knitting and found smaller crown jewel companies that could be acquired for fair value and then made bigger and better. We’ve applied this ‘blue collar’ approach successfully, globally leveraging our brand and employing our dedicated origination and in-house operating teams. This heavy lifting has resulted in our two decades of consistently superior returns.”
“From our beginnings as a small firm with a handful of investments to our current global stature, we’ve held fast to our commitment to offer the world’s most sophisticated investors access to the great upside of the small market space with the institutional quality and risk mitigation that we uniquely provide,” said Béla Szigethy, Riverside Co-CEO. “RCAF V has already invested in several attractive platform and add-on investments, and our pipeline of new deals is building nicely as markets begin to thaw. We’re most thankful to those investors who recognized our proven ability to deliver these benefits by rewarding us with their commitment to RCAF V.”
The RCAF team is led by Co-Fund Managers David Gordon and Suzy Kriscunas and Partners Stu Baxter, George Benson, Stephen Dyke, David Gold, Tim Gosline, Anne Hayes, Kristin Newhall, Karen Pajarillo, and Andrew Strauss.
RCAF V investors include:
• Clients of Altius Associates Ltd.
• Clients of the Credit Suisse Customized Fund Investment Group
• State of Oregon (advised by PCG Asset Management)
• Meketa Investment Group
• Select clients of Franklin Park Associates including Illinois State Board of Investment
• IAM National Pension Fund
• Sentry Insurance
• Massachusetts Mutual Life Insurance Company
• University of Washington
As a percentage of total capital committed, roughly 84% of RCAF V investment dollars came from U.S. firms. Overall, investors are comprised of the following categories:
• Public Pensions 44%
• Endowments/Foundations 12%
• Funds-of-Funds/Asset Managers 9%
• Other Pension Plans 9%
• Insurance Companies 9%
• Family Offices/Individuals 5%
• Riverside Employees 5%
• Superannuation Schemes 5%
• Others 2%
The employees of Riverside regularly commit at least 5% of each fund, representing a significant portion of their net worth.
The Riverside Company (www.riversidecompany.com or www.riversideeurope.com)
The Riverside Company is the largest global private equity firm focused on the smaller end of the middle market (“SEMM”) and is one of the industry’s most experienced buyout investors. Riverside invests in premier SEMM companies valued up to $150 million and partners with strong management teams to build companies through acquisitions and value-added growth. Since its founding in 1988, the firm has invested in 215 transactions with $4.7 billion in enterprise value, and has a current portfolio in North America, Europe and Asia consisting of 68 companies. Riverside offers certainty to close and can complete acquisitions in as little as 45 days, thanks to its more than $3.0 billion of capital under management, over 180 professionals in 18 offices (Atlanta, Brussels, Budapest, Chicago, Cleveland, Dallas, Eindhoven, Hong Kong, Los Angeles, Madrid, Munich, New York, Prague, San Francisco, Seoul, Stockholm, Tokyo and Warsaw), and long-standing relationships with partner lenders. As of March 31, 2009, Riverside’s portfolio had combined annual sales of $3.4 billion, EBITDA of $530 million and more than 14,000 employees. According to Thomson Venture Economics, as of December 31, 2008, seven of the firm’s nine mature vintages are top quartile performers on a net cash-on-cash basis. Riverside’s investors include the world’s leading pension funds, endowments, funds-of-funds, insurance companies and banks.