Riverside’s Fifth Fund Almost Halfway To Target

The Riverside Company’s fifth fund appears to be progressing steadily toward its goal, despite resistance from some investors to proposed higher fees.

The Capital Appreciation Fund V LP, earmarked to acquire companies generating $5 million to $15 million in EBITDA, has attracted $550 million in commitments from both return investors and new investors, said spokesperson Christine Croissant. The firm seeks to raise $1.25 billion altogether, according to a regulatory filing, which also noted that the fund had reached $259 million by mid-May. The fund has a minimum investment of $1 million.

Béla Szigethy, co-chief executive officer, declined to comment on the fees proposed by the fund, as did an investment officer with The City of Philadelphia Board of Pensions and Retirement, which has committed $20 million to the fund. The firm is believed to have argued for the higher fees to help sustain its expanding payroll of deal-generating and operating executives.

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

The firm has specialized in the smaller end of the middle market since 1988 and has done more than 193 deals with a total enterprise value of $3.4 billion. In 2006, the company did 26 acquisitions; in 2007, 28 deals were completed; and so far this year, Riverside has finalized 19 deals.

The company has a senior professional staff of 22 and over 170 other professionals in seven offices in the United States, as well as bureaus in Amsterdam, Brussels, Budapest, Madrid, Munich, Prague, Seoul, Stockholm, Tokyo and Warsaw. Its current portfolio in the U.S., Europe and Asia totals 62.

Riverside’s last general buyout fund, Fund V’s predecessor, was the $750 milion 2003 Riverside Capital Appreciation Fund, which acquired companies with enterprise values ranging from $10 million to $100 million. According to data from the Oregon Public Employees’ Retirement Fund, the 2003 Riverside Capital Appreciation Fund generated an IRR of 17.1% as of June 30, 2007.