Riverside halfway to $1.25B target

The Riverside Co.’s fifth fund is moving toward its $1.25 billion target, despite resistance from some limited partners to the firm’s proposed higher fees.

The firm is believed to be asking for higher fees to help sustain its expanding payroll of deal-generating and operating executives. Co-CEO Béla Szigethy declined to comment on the proposed fees. Similarly, an investment officer with The City of Philadelphia Board of Pensions and Retirement, which has committed $20 million to the fund, also declined comment.

The fund, Capital Appreciation Fund V, has raised $550 million in commitments from return and new investors, confirmed spokesperson Christine Croissant. Riverside’s last general buyout fund was the 2003 Riverside Capital Appreciation Fund, which raised the $750 million. The fund generated an IRR of 17.1% as of June 30, 2007, according to data from the Oregon Public Employees’ Retirement Fund, an investor in its previous fund.

In June, the firm made its first acquisition with its fifth fund, buying ITEL Laboratories, a Jacksonville, Fla.-based independent tester for determining the fair-market replacement value of damaged products. Riverside acquires companies in the automotive, business services, food, health care, manufacturing, media and technology industries.

The firm has specialized in the smaller end of the middle market since 1988. In 2006, the firm has acquired 26 companies; in 2007, 28 deals were completed. So far this year, Riverside has finalized 19 deals. —Nancy Gordon