Firm Profile: Riverside Closes 4th 06 Buyout, Expects Busy Year –


Firm: Riverside Co.

Jan. 2006 Deals: Thibaut Inc.; RCS Management

Corp.; ITT Richter Chemie-Technik GmbH; MK Systemy


No. of Deals Expected In 2006: 25 30

Market Sizes: Micro-cap; Lower mid-market

Firm Headquarters: Cleveland, Ohio


2005 year-end predictions regarding the state of this year’s private equity market were almost unanimously buoyant. Largely, general partners, investment bankers and other industry participants forecasted that 2006 would offer more of what we saw-with respect to the burgeoning private equity market-in the previous year.

The Riverside Co. is one firm that’s wasting no time making those predictions come true. The Cleveland-based private equity firm has already closed four buy-side transactions since the New Year began. The first deal-Riverside’s buyout of wallpaper company Thibaut Inc.-was announced on Jan. 11, and shortly thereafter the firm announced the leveraged buyout of RCS Management Corp., a respiratory care provider. Both those deals fell under the firm’s “micro-cap” investment parameters, meaning that both targets generate up to $3 million of EBITDA and post more than $5 million in revenue.

Riverside’s most recent transactions include the acquisition of MK Systemy Kominowe, a Poland-based manufacturer of stainless steel chimney systems, and the carve-out of Germany-based pump and valve provider ITT Richter Chemie-Technik GmbH from ITT Industries Inc. Both deals were announced before the end of January.

“We are very optimistic for 2006,” Riverside Managing Partner Stuart Kohl told Buyouts. “We will continue to stay focused on the small end of the middle market, where there are a lot of gems-crown jewels’ as we call them-that can still be acquired at reasonable multiples.”

Kohl noted that within Riverside’s micro-cap strategy, the firm typically sees companies acquired for between 4x and 6.5x EBITDA, while at the firm’s small mid-market tier, multiples between 5.5x to 7.5x EBITDA are the norm. In aggregate, he said, the firm hopes to complete between 25 and 30 buy-side transactions before year end.

Including the four acquisitions completed by Riverside this year, the firm has closed an aggregate of 124 deals worldwide since its founding in 1988. Its current portfolio in the U.S. and Europe includes 44 platform companies.

MK Systemy, Riverside’s most recent acquisition, has seen its export sales of chimney equipment heat up in recent years, primarily to customers in Germany, Scandinavia, and other neighboring regions. But according to Piotr Misztral, a partner in Riverside’s Warsaw office, there is still room to grow. “There is a great deal of unrealized potential in export markets…and we expect to blaze new trails across Western Europe with increased sales.” Much of MK Systemy’s growth will come by way of add-on acquisitions.

Pump and valve manufacturer Richter, meanwhile, supplies its wares to the chemical and pharmaceutical industries. With about 220 employees, its customers include Bayer, Pfizer and Schering.

“Richter offers a prime opportunity to jump into the current of a mature industry with a stable competitive landscape,” said Munich-based Riverside Partner Kai Koeppen.

While financial terms of either transaction were not disclosed, Riverside’s European practice targets companies where operating profit margins exceed 10% and total at least e1 million.

Riverside is currently making platform investments through three separate funds. For U.S.-based lower middle market transactions, the firm is tapping its $750 million Riverside Capital Appreciation Fund 2003, which Kohl said is about 40% invested. For lower mid-market investments in Europe-like the Richter and MK Systemy transactions-Riverside is presently making use of its vintage-2002 Riverside Europe Fund II. And regarding the firm’s micro-cap strategy, which just got off the ground last year, Riverside is deploying equity from its Riverside Micro-Cap Fund I LP.

Last year, Riverside acquired 17 companies-13 through its North American funds and four through its European-focused funds. The firm currently conducts business out of eight offices located in New York, Cleveland, Dallas, San Francisco, Budapest, Prague, Warsaw and Munich.