River Associates beats target for Fund VI

The $222m fund marks the first time River Associates Investments has received commitments from pensions, insurance companies and endowments, says RAI partner Mark Jones.

Lower mid-market firm River Associates Investments has raised $222 million for its sixth fund, above its $200 million target and just under its $225 million hard-cap. The fund was in market for roughly 18 months.

Fund VI is more than double the size of RAI’s previous vehicle, a 2005 vintage fund that collected $110 million, and represents the first RAI fund to receive commitments from institutional investors such as insurance companies, endowments, pension plans and fund of funds.

“We’ve been backed historically by family offices and we made a concerted effort to go to institutions this time,” partner at RAI Mark Jones told Private Equity International

Despite the dramatic increase in capital, RAI will continue to invest in companies with earnings before interest, tax, depreciation and amortisation between $3 million and $10 million.

“We’re not leaving lower middle market buyouts. We are absolutely staying in that space,” Jones said.  “This larger fund gives us the bandwidth to chase those opportunities at the top end of the range and then similarly it gives us the bandwidth to also pursue more [add-on investments].”

Roughly 90 percent of limited partners in RAI’s previous fund committed capital to Fund VI.

LB Group acted as placement agent for Fund VI, though the “vast majority” of the capital was raised in-house, Jones said. The firm has never used a placement agent for its previous funds.

RAI has invested roughly $50 million from Fund VI to date, split almost evenly between platform investments and add-on acquisitions.

The firm targets a variety of sectors but frequently invests in the manufacturing, distribution and industrial service sectors. Last May, RAI sold custom metals manufacturing company Coining for $148 million, generating a 6x return multiple and 76 percent IRR, according to a statement.

Founded in 1989, River Associates Investments has made 71 acquisitions to date and invests in companies in the US and Canada. The firm is based in Chattanooga, Tennessee, with an office in Santa Fe, New Mexico.