Five Questions With…Mark Jones, Principal, River Associates –

What’s the investing environment like these days?

It’s extremely aggressive. It’s probably comparable to that of the late 1990s. And purchase price multiples are extremely high. There’s certainly a premium paid for anything north of $8 million to $10 million of EBITDA. There’s also a premium paid for anything with historical and perceived future growth. Below that, it’s still actually fairly aggressive for smaller companies – even in the $5 million range – because there are more lenders willing to get involved with companies of that size.

We don’t see anything that’s going to change them anytime soon. There’s an abundant supply of equity capital and an abundant supply of debt capital. It’s usually an external event that nobody sees coming like September 11th or like the real estate and savings and loan crisis in the early 1990s that slows the markets down.

What have you been spending most of your time on? Fundraising, exits, or deals?

We’ve been busy. We sold something in December, sold something in February and we’re going to market with something literally this week. We’re about to make our fourth platform company investment in the last 18 months and we are also in the process of raising River V, so we’ve got it going on on all fronts.

There has been a lot of first-time funds entering the market these days. What’s your take on them?

We do see a lot of them. I think the principals behind the funds generally have experience with a larger fund and they’re now setting up their own shop. But in terms of numbers of entities out there, I know I see a lot of new private equity groups, both committed funds and what I would call uncommitted or pledge funds.

The key is always in your performance, but to the extent that they’re able to make some successful investments, I assume that they’ll be successful in raising a subsequent fund.

River Associates claims that River IV’s small and patient investor base has enabled the firm to hold onto portfolio company investments much longer than most other private equity sponsors. Why hold onto companies in this market?

Sometimes it can be difficult for a private equity group to distinguish its fund from another private equity group, and it was a way to differentiate ourselves to management teams when they’re trying to select a private equity partner. We can be a longer-term partner for the management team and don’t have to go into an investment with a short-term horizon, so hopefully the management team feels comfortable that we can be a longer-term partner.

Are you planning on modifying that strategy in order to take advantage of this exit market?

Well, while we have a longer-term fund, we always remain opportunistic in terms of maximizing the returns for our shareholders. It all depends on the opportunities that are put to us by potential buyers, and lately we’ve actually gotten several unsolicited calls from interested corporate buyers about some of our portfolios, which is sort of an interesting phenomenon.