The Riverside Company has sold a minority stake to Parkwood, a private financial services company that has been a limited partner in Riverside funds for nearly a decade.
Cleveland-based Parkwood purchased a non-voting stake that's just over 9 percent, according to Riverside co-chief executive Béla Szigethy.
Over the last year, several private equity firms of various sizes have sold minority stakes in their management companies, including Vista Equity Partners, Silver Lake Partners and KPS Capital Partners, which fermented the idea that Riverside could conduct a similar transaction, said co-CEO Stewart Kohl.
“We hired an advisor [Keefe Bruyette & Woods] and we began to learn about the market and the different entities participating,” he said, adding that Riverside had conversations with about a dozen firms. “Ultimately, we were very pleased. We made a deal with an investor with whom we've had a long-term relationship.”
In addition to being an LP in several of Riverside's funds, Parkwood has also co-invested on several transactions with Riverside.
“On a personal level, [Parkwood CEO] Morton Mandel has been somewhat of a mentor to me,” said Kohl. “He's a very inspiring person.”
The proceeds from the transaction will be used to fuel growth at the firm, including to contribute to the GP commitment Riverside invests in its own funds, and to help fund new initiatives. Recently, Riverside entered the private debt market. An employees option plan has also been established to retain and reward staff.
Cleveland-based Riverside, which was founded in 1988, has $5.9 billion in assets under management.