Riverside Exits Merit, Enters HCPro To End 2002 –

The Riverside Company, in its first exit in two years, has completed a transaction to sell Merit Industries to St. Louis-based Harbour Group, a privately owned operating company.

Specific terms of the deal were not disclosed. Merit Industries develops, manufactures and markets coin-operated touch screen entertainment systems. The company currently has 150,000 machines in operation worldwide, a far cry from its beginnings, described by Brooke Ablon, a partner with Riverside, as “servicing the mom-and-pop small-tavern market.”

Ablon said “Profitability increased by over 50% since we bought them.” On this deal, Riverside also collected 2.3 times cash-on-cash return for its investors.

“We expanded Merit’s market to include airports, hotels and chains such as TGI Friday’s,” he said. Riverside acquired Merit in August 1998, using its $108 million Riverside Capital Appreciation Fund ’98 for the purchase. The fund had its final close in January 1999.

The firm’s last exit, in March 2000 from Trend Technologies, was sold only after affixing three add-ons, and the deal provided Riverside with a return “north of 50 percent,” according to Christine Croissant, Riverside spokeswoman.

Baker’s Dozen in 2002

Less than a week after wrapping up the Merit exit, Riverside celebrated Christmas early when the firm obtained a 62% ownership in HCPro, a health care information provider. According to Croissant, HCPro achieved sales of $26 million in 2002. Founded in 1986, the company publishes health care-related information, including medical records, billing, compliance and reimbursement regulatory information.

The management buyout is the 13th deal Riverside closed in 2002, and represents its sixth platform acquisition during the year, as well as its second in the healthcare sector, following Beacon. The remaining four platforms bought in 2002 are Caprock (telecom), Selig (sealing), J.C. Whitney (direct mail catalogs) and AEC-Bargeman (auto).