Riverside closes fourth fund on $750m

The New York- and Cleveland, Ohio-based middle-market specialist beat its original fundraising target set in June 2003, raising almost double the capital of its previous fund.

Providing yet another example of successful fundraising efforts in down market times, New York- and Cleveland, Ohio-based private equity firm The Riverside Company has closed its 2003 Riverside Capital Appreciation Fund (RCAF '03) on $750 million (590 million).

Riverside launched the fund in late June 2003 with a target of $600 million, according to Leslie Hardin, the firm's chief administrative officer. The firm's previous fund, RCAF 2000, closed in October 2001 on $412.75 million. That fund is now approximately 75 percent subscribed, with the remainder of the capital reserved for add-on acquisition to RCAF 2000 portfolio companies.

Returning investors in the new fund include the State of Oregon, Credit Suisse First Boston, TIAA-CREF, Massachusetts Mutual Life Insurance Company and Liberty Mutual Group.

NIB Capital, Stanford University, Allianz Private Equity Partners and Northwestern Mutual are among the institutions backing Riverside for the first time.

Riverside employees committed 5 percent to the fund.

'We are fortunate to have had the confidence and support of our existing investors as well as many potential investors who took the time to get to know us in advance of the fundraising process,' managing general partner Béla Szigethy said. 'We view this high level of interest as a testament to our returns, investment philosophy and steady team that has had very little turnover. Many of the new LPs in RCAF '03 ultimately requested larger allocations than they'd originally indicated, so in trying to accommodate them and committed to keeping to the hard cap, we had to say no to interested investors who came along later in the process.'

Riverside said returning investors increased their capital commitments to the previous fund by 73 per cent, representing nearly two-thirds of the $750 million total for RCAF '03. Riverside plans to make investments in the smaller end of the middle market, looking for transactions with enterprise values between $10 million and $100 million.

Riverside's first two investment vehicles, raised in 1995 and 1998, respectively, were pledge funds. The firm's first third-party fund was RCAF 2000. Hardin said the firm had realised a gross IRR of 66.5% across its funds.

The firm has made one realisation from its 2000 fund – in January it sold HammerBlow Towing Systems, realising a 3.8 times cash-on-cash return.

Riverside currently manages approximately $1.3 billion in capital. Earlier this month, the firm made its third deal of 2004 with the purchase of Northwest Economic Associates (NEA), a Vancouver, Washington-based provider of natural resources economic consulting services. NEA will become part of ENTRIX, an environmental consulting company acquired by Riverside in March 2003. Equity for this deal came from RCAF 2000.