Riverside edtech platform makes fourth add-on; IMB’s Tarrus Richardson shares insights on DEI in PE

Good morning, Hubsters. MK Flynn here with a jam-packed Wire on a busy Thursday morning.

Today, we begin with a look at Riverside’s latest deal in education technology. Then, we’ll explore a resurgence in manufacturing M&A.

We’ve got an interview with Tarrus Richardson, founder and CEO of IMB Partners, about DEI. This is part of a series we’re launching today for Black History Month.

And we’re asking for your input as we plan the Private Markets Investor Summit 2024.
Let’s get to it!

EdTech. Education technology is a subsector I’ve been monitoring closely over the last few years. There was a surge of deals in the space during the height of the pandemic, when all learning went online. The deal activity slowed down over the last year, but yesterday a transaction was announced that caught my eye.

The Riverside Company, headquartered in New York and Cleveland, invested in Eduthings, a Richmond, Texas-based provider of software for career and technical education (CTE) administrators, teachers and students, for undisclosed terms.

Eduthings is an add-on investment to Riverside’s platform, iCEV, a Lubbock, Texas-based developer of digital curriculum, instructional materials and industry certifications for the CTE market.

The deal marks Riverside’s fourth add-on investment for the iCEV platform. In 2022, iCEV bought Applied Educational Systems, Today’s Class and DroneCurriculum.net.

“We see an exciting opportunity for iCEV to offer its customers new tools, creating an even more comprehensive, career-readiness focused platform,” said Riverside Capital Appreciation Fund Partner Drew Flanigan, in a statement. “The acquisition of Eduthings continues iCEV’s strong momentum, providing a more complete, and compelling offering to our customers and differentiating iCEV in the marketplace. We will continue to expand the iCEV platform through organic and M&A initiatives.”
Riverside has been betting on edtech for several years.

For example, the firm invested in Clinical Education Alliance, a provider of interactive live and web-based certified continuing medical education activities and related training for healthcare professionals, in 2020 and has since made two add-ons (Rockpointe in 2022 and MDoutlook in 2021).

The firm has also had exits in the sector. Riverside sold its majority investment in N2Y, a provider of software, curricula and tools to the K-12 special education market, to Providence Equity Partners in 2019.

Keep on adding on. 2023 will be the “year of the add-on deal,” according to Scott Moss, managing partner for PE and transaction advisory services at Cherry Bekaert. “The ability to bring different companies together through add-ons or multi-deals that bolster the original platform and add revenue and, to an extent, cost synergies as you have more of common things together, is going to be important.”

The advisory, tax and assurance firm recently released its Private Equity Industry Report: 2022 Trends and 2023 Outlook. Industrials returned as a bright spot in PE dealmaking, according to the report.

PE Hub’s Georgina Tzanetos spoke with Moss and others from the firm to dig a little deeper.

“Historically, private equity interest and deal volume in the industrial sector had been flat to down,” said Moss. “With covid, what we saw is the resurgence of bringing things that were offshore back onshore, diversification of supplier base, and then automation that can take some manual labor out of the equation and make you less subject to some of the issues that we saw during the pandemic.”

Apple moved some of its capabilities out of China and back into the US, Moss pointed out. “We see that trend trickling down into the middle market industrial manufacturing businesses as well.”

Artificial intelligence and Industry 4.0 are driving deals, said Richard Schwartz, senior tax manager.

“From an industrial manufacturing standpoint, certainly we are seeing a lot more of what is called Industry 4.0,” Schwartz said. “You are seeing much more intelligence and ongoing machine monitoring within the manufacturing floor. AI-powered preventative machine diagnostics helps manufacturer managers with up time, which would help them to achieve their volume without having an issue on the floor.”

Moving the needle. As we celebrate Black History Month, PE Hub is featuring interviews about diversity, equity and inclusion (DEI) with private equity professionals who are Black. Today, we are launching the series with a Q&A with Tarrus Richardson, the founder and CEO of IMB Partners, a Bethesda, Maryland-based private equity firm that focuses on utilities and government contracting.

IMB stands for Investors in Minority Businesses, Richardson told PE Hub’s Obey Martin Manayiti previously. “We are intentional and unapologetic about trying to find ways to build, buy and/or grow minority or women-owned businesses,” Richardson said.

Here are excerpts from Obey’s current interview with Richardson:
Over the last couple of years, PE firms have talked a lot about making the industry more inclusive. In your view, how are PE firms doing when it comes to DEI? If you had to give the industry a letter grade on this today, what would it be?

It’s difficult to assign a letter grade to diversity, equity and inclusion for PE firms. The conversations are happening, but the data and industry reports show a need for a more progress. I have been an inclusion advocate for years, and since the murder of George Floyd, I participate in more conversations about inclusion in professional circles. There are more initiatives and organizations meeting to address DEI within the industry, and steps are moving in the right direction. But we know the industry struggles to grow the representation of ethnic and racial minorities, gender minorities, members of the LGBTQ+ community, as well as individuals raised in low-income households. The needle will start to move when recruiting delivers more diverse groups of junior and senior PE professionals. That’s something we prioritize at IMB and where we hope to see the industry land.

What’s the biggest mistake PE firms make when it comes to under-represented groups?

There are absolutely ways to be thoughtful about recruiting and retaining under-represented talent. PE firms must look outside their own limited circles for new hires; there is tremendous talent available from non-traditional industries. If an employee feels that they are the only one representing a minority group, it is difficult to retain that employee and support them in doing their best work. Inclusion must go deeper than the first hire. The recently published McKinsey.LeanIn research highlights several especially relevant points about this for Black women.

What are PE firms doing right?

I have been encouraged by firms that are actively addressing diversity and implementing solutions for change. Scholarship programs like NAIC, Avante and AltFinance are an incredible first step to identify young talent from different industries and backgrounds. MLT, the Toigo Foundation, and SEO have delivered superior candidates to our best business schools and therefore into internships and associate programs on Wall Street. Firms are also making strides towards accountability by tracking and reporting DEI data, looking internally to determine if their culture enables everyone to succeed, and reviewing supply chains and vendors to drive income to minority-owned businesses. These are important building blocks for a more equitable industry.

It’s Black History Month, and PE Hub is showcasing Black leaders in private equity. Please tell us about someone you admire. The people I admire most in this industry are leaders who have built firms from the ground up, investing in great teams while also giving back to their communities – people like Frank Baker at Siris Capital, David Grain at Grain Capital Management and Robert Smith at Vista Equity Partners, for example. This ethos has been a throughline in my personal investing story, and a model that I’m working to emulate as I build IMB Partners. We’ll have more Black History Month Q&As throughout February.

Help us shape next year’s summit! Private Equity International will be hosting the Private Markets Investor Summit 2024, a major networking event for LPs and GPs in North America in early 2024.

As we plan the event, we’d love your input. Please share your thoughts by taking our survey.

The survey takes no longer than 5 minutes to complete, and your insights will directly shape the format, content, and overall experience of the Private Markets Investor Summit 2024.

To thank you for your time, each respondent will receive a complimentary copy of Private Equity International’s LP Perspectives Report 2023.

Many thanks in advance for your participation!

Tomorrow, Obey will wrap up the week in Friday’s Wire, including a new “listicle” of deals.

Cheers,

MK