Oregon buyout shop suspends fund-raising

Riverlake Partners has suspended fund-raising for its second vehicle because of the difficult environment, says a source familiar with the firm’s plans.

The firm had raised $62 million by the end of the first quarter of 2008, and firm executives expected to raise about $100 million by the end of the summer 2008. The shop has raised about $70 million in commitments to date for the fund, Riverlake Partners II.

Riverlake is the latest in a string of firms that have suspended or significantly changed their fund-raising goals amid the most difficult fund-raising environment in recent memory.

In April, Jacobson Partners, a New York-based turnaround firm, dropped plans to raise JP Acquisition Fund V. The firm raised about $125 million for its predecessor fund.

CapitalSouth, a Charlotte, N.C.-based lower mid-market firm began raising CapitalSouth Partners Fund III in May 2007, and planned to close on its target of $330 million in May 2008. The firm has so far raised $300 million and has extended its fund-raising period.

The initial target for Riverlake’s fund was $150 million, though the source says that firm executives are comfortable operating below that level. The firm has not yet closed a deal from the fund.

Riverlake executives declined to comment.

The source declined to elaborate on prospects for the fund’s first deal, other than to say firm executives expect to close on a deal within the next several months.

The Portland, Ore.-based firm recently terminated its arrangement with E.L.K Capital Advisors, a Northbrook, Ill.-based placement agent it retained to help it raise the fund. An E.L.K. Capital executive did not return calls seeking comment.

Riverlake closed its debut fund at $34 million in 2004. Investors in the second fund include the Oregon Investment Fund.

Riverlake has made seven investments via its first fund, and it has one exit, a 4x return on Stock Equipment Company Inc., which it sold in June 2006 to Schenck Process in Germany after owning the company for less than three years. Revenue at the company increased by 57%, to $66.3 million, under the guidance of Chuck Grant, a Riverlake operating partner, according to the firm’s website.

Riverlake seeks to invest $3 million to $8 million in companies with enterprise values between $5 million and $50 million and revenue greater than $10 million. Sectors of interest include industrial and consumer products manufacturing, and service businesses. The firm regularly invites its investors to co-invest alongside them in deals.

Erik Krieger, a former investment banker at Paine Webber and co-founder of Pacific Crest Securities, a technology-focused investment bank, founded Riverlake in 2002.

In addition to Krieger and Grant, the firm’s investment team also includes Partner Victor Petroff, a former president of the Precision Interconnect Division of Tyco International Ltd.; and Vice President Greg Tansey, who was formerly a principal at SmartForest Ventures, a Portland, Ore.-based early stage venture firm focused on information technology investments. —Bernard Vaughan