Private Equity News & Analysis

Riverside closes third Europe fund on €315m

With a new fund nearly ten times the size of its predecessor, the Cleveland and New York-based firm plans to expand its European footprint to include the Benelux region, the Iberian Peninsula, Brussels and Holland.

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The Riverside Company, a Cleveland, Ohio-based firm focused on the small end of the middle market, has closed its third European fund on €315 million ($433 million). The fund exceeded its initial target of €250 million, and is nearly ten times the size of its last Europe fund, which closed on €38 million in July of 2002

The firm plans to target growth-oriented, niche market leaders with enterprise values between €15 million and €120 million. The fund has already invested in seven companies, including a €25 million equity investment in ONI, a Portuguese telecommunications company. Ultimately Riverside plans to acquire 10 to 15 companies for REF III’s portfolio.

Bela Szigethy, Riverside’s co-chief executive, said that Riverside will grow nearly all of REF III’s portfolio companies through a combination of add-on acquisitions and organic expansion.

“A fundamental part of Riverside’s strategy is to buy relatively small companies and grow them aggressively,” Szigethy said.

Fundraising for Riverside Europe Fund III began in early 2006, and ended in March of 2007. Riverside did not use a placement agent. Szigethy said that investor enthusiasm built gradually, and picked up significantly as the fundraising deadline approached.

The fund’s 50-some limited partners include Alfred I. DuPont Testamentary Trust, AlpInvest Partners, Altius Associates, Bankinter, LODH Private Equity AG, Massachusetts Mutual Life Insurance Company, Meketa Investment Group, Mithras Capital Fund, and Nord KB Dachfonds II.

Szigethy said that he expects that about 75 percent of REF III will be invested in Western Europe, and 25 percent in Central Europe. With this latest fund Riverside is expanding its target regions to include the Iberian Peninsula, the Benelux region, Brussels and Holland. The firm recently opened new offices in Brussels and Madrid, and plans to open an office in Stockholm later this year. In the next two years, Szigethy said, the firm hopes to expand into France and the UK as well.

Riverside has two other fund families: the Riverside Capital Appreciation Fund and the Riverside Micro-cap Fund. Its last RCAF closed on $750 million in 2003. The firm has nearly $2 billion in assets under management.