Riverside collects $1.2bn for fifth buyout fund

The lower mid-market firm has raised 30% more than its original $900m target.

The Riverside Company has closed its fifth buyout fund with $1.17 billion in commitments, surpassing its original target of $900 million. Like its predecessor, which closed on $750 million in 2003, the fund will target North American-based companies with EBITDA between $5 million and $15 million.

Based in Cleveland, Ohio, Riverside began fundraising for Riverside Capital Appreciation Fund V in March 2008. “This is the worst fundraising market since dinosaurs roamed the earth,” Stewart Kohl, Riverside co-chief executive officer, said in a statement.

Investors in the fund are split among several different types, including 44 percent public pensions, 12 percent endowments/functions, 9 percent funds of funds/asset managers, 9 percent insurance companies and 5 percent Riverside employees, among others.

Just under half of the capital in the fund comes from new investors, Kohl said in an interview, including the State of Illinois and Sentry Insurance. Riverside made an effort to attract “new blood” in the fund, Kohl said.

Other LPs include Meketa Investment Group, Massachusetts Mutual Life Insurance and IAM National Pension Fund.

Riverside’s strategy is to build small companies into mid-market size through add-ons and organic growth.

The firm has made several investments from Fund V, including the acquisitions of Coeur, a provider of disposable medial products used in diagnostic imaging; DuBois, a specialty chemical maker; materials testing company ITEL Laboratories and Sencore, a maker of parts for the video, audio and data transmission industries.

Fund V is the largest Riverside fund to date since the firm was founded 21 years ago. The size of the fund will allow Riverside to pursue new opportunities even if the capital markets remain tight, Kohl said.

“We're aware that for now and [at least] the next year, any transactions will require more equity; this allows us to have more equity transactons,” he said. 

The firm's deal pipeline has slowly began to expand in 2009 after largely evaporating after the global financial meltdown in September.

“We're optimistic as we go into the second half of 2009 and 2010 we'll see a lot more activity,” Kohl said.

Riverside is raising $100 million for its first Asia-focused fund, and held a first close on $25 million in September. The firm also is raising its fourth European fund, targeting at least €550 million.