Archives for July 14, 2014

Riverside Closes Latest Fund at Hard Cap

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The Riverside Company has completed fundraising for Riverside Micro-Cap Fund III (RMCF III). The fund was oversubscribed and closed at its hard cap of $350 million in capital commitments.  As a Small Business Investment Company (SBIC), RMCF III will combine its private capital with up to $150 million from the US Small Business Administration for a total fund size of $500 million.

“RMCF III attracted huge interest. Not only was the fund meaningfully oversubscribed, but we received commitments for the whole fund just five months after launch,” said Riverside Co-CEO Stewart Kohl. “The RMCF team has performed very well and was rewarded by investors for that performance.”

Some of RMCF III’s investors include BMO Harris Bank, Clients of Cliffwater, Makena Capital, Clients of Meketa Investment Group, Clients of Partners Capital Investment Group, and the State of Michigan Retirement Systems.

“RMCF is a very differentiated fund with a strong track record,” said Erick Bronner, Global Head of Fundraising and Investor Relations. “We are very pleased with the support we received from existing and new investors, which enabled us to conclude the fundraising very quickly.”

Like prior funds, RMCF III looks to make control buyouts of companies with up to $5 million of EBITDA.  Both RMCF I and RMCF II are top-performing funds per Cambridge Associates’ benchmarks. Thanks to its performance in growing small businesses, RMCF II was recently recognized by the SBA as SBIC of the Year.

“Focusing on the smallest ‘micro’ deals was a fairly risky proposition back when RMCF started,” said Riverside Co-CEO Béla Szigethy. “Over time, our strong team has shown how careful investing and world-class operational resources can supercharge growth at these little companies.”

The RMCF fund family was launched in 2005. Since then, the RMCF team has acquired 80 companies (39 platforms, 41 add-ons) and exited 12 portfolio companies. RMCF’s investment strategy is to drive significant improvements in companies’ operations, management teams, pricing and/or infrastructure and is  seeks to grow EBITDA both organically and through add-on acquisitions.

“We love working with the entrepreneurial owners that we often encounter in micro-cap companies,” said Fund Manager Loren Schlachet. “By partnering with us, they gain access to institutional-quality resources and decades of management experience. These owners often retain a meaningful stake in their business and are well-aligned with us to bring their company to the next level. We’ve already made investments in RMCF III, and we’re excited about continuing to deliver strong returns for our investors and our partners.”

The close of RMCF III comes on the heels of two other recent fund closings. Like RMCF III, both Riverside Capital Appreciation Fund VI (RCAF VI) and Riverside Asia-Pacific Fund II (RAF II) closed well above their targets receiving strong support from Riverside’s investor relationships.

The Riverside Company is a private equity firm focused on the smaller end of the middle market (“SEMM”). Riverside specializes in investing in SEMM companies (those valued up to $250 million) and partners with management teams to build companies through acquisitions and value-added growth. Since 1988, the firm has invested in more than 340 transactions with a total enterprise value of more than $6 billion. The firm’s current portfolio includes more than 70 companies. The Riverside Company is headquartered in New York with additional offices in Atlanta, Chicago, Cleveland, Dallas, Los Angeles, San Francisco, and London (www.riversidecompany.com).

2014 PEPD • Private Equity’s Leading News Magazine • 7-14-14

Alternative Assets Continue Their Inexorable Rise

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The latest research from Towers Watson and the Financial Times shows total assets managed by the top 100 alternative investment managers globally reached $3.3 trillion in 2013 ($3.1 trillion in 2012),

The Global Alternatives Survey, which covers seven asset classes and seven investor types, shows that of the top 100 alternative investment managers, real estate managers have the largest share of assets (31% and over $1 trillion), followed by private equity fund managers (23% and $753 billion), hedge funds (22% and $724 billion), private equity funds of funds (PEFoFs) (10% and $322 billion), funds of hedge funds (FoHFs) (5% and $173 billion), infrastructure (4%) and commodities (2%).

“For almost all of the past 11 years of this research, we have seen increasing allocations to alternative assets by a wide range of investors. Not only has the appeal of alternative assets broadened to include many more insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond the likes of hedge funds and infrastructure to include real assets, illiquid credit and commodities,” said Brad Morrow, head of manager research, Americas. “So it is not surprising that allocations to alternative assets by pension funds, for example, now account for around 18% of all pension fund assets globally, up from 5% 15 years ago.”

The research — which includes data on a diverse range of institutional investor types — shows that pension fund assets represent a third (33%) of the top 100 alternative managers’ assets, followed by wealth managers (18%), insurance companies (9%), sovereign wealth funds (6%), banks (3%), funds of funds (3%), and endowments and foundations (3%).

“Pension funds continue to search for new investment opportunities, and alternative assets have been an area where they have made, and continue to make, very significant allocations. While remaining an important investor for traditional alternative managers, pension funds are also at the forefront of investing in new alternatives, for example, in real assets and illiquid credit. But they are by no means the only type of institutional investor looking for capacity with the top alternative managers. Demand from insurers, endowments and foundations, and sovereign wealth funds is on the rise and only going to increase in the future as competition for returns remains fierce,” said Mr. Morrow.

The research shows that for the top 100 managers, North America continues to be the largest destination for alternative capital (45%), with infrastructure as the only major exception (with more capital invested in Europe). Overall, 38% of alternative assets are invested in Europe, 7% in Asia Pacific and 10% invested in the rest of the world.

In the ranking of top 100 asset managers by pension fund assets, these increased by nearly 2% from the year before to reach nearly $1.4 trillion. Real estate managers continue to have the largest share of pension fund assets, with 35%, followed by Private Equity Fund of Funds (PEFoFs) (20%), private equity (15%), hedge funds (12%), infrastructure (8%), Hedge Fund Fund of Funds (FoHFs) (7%), illiquid credit (2%) and commodities (1%).

“Pension funds globally continue to put their faith in diversity via increasing alternative assets to help deliver more reliable risk-adjusted returns at the total fund level. This is evidenced by the growth, significant in some instances, in all but one of the asset classes in the past five years. Most of the traditional alternative asset classes are no longer really viewed as alternatives, but just different ways of accessing long-term investment themes and risk premiums. As such, allocations to alternatives will almost certainly continue to increase in the long term but are more likely to be implemented directly via specialist managers rather than funds of funds, although funds of funds will also continue to attract assets, as borne out by this research,” said Mr. Morrow.

“Throughout the crisis, investors continued to move away from simply holding equities as their main growth asset and to make greater use of alternative assets. We expect this to continue in the future. We think the effort to diversify in this way is worthwhile, but investors need to be cautious about choosing the best and most efficient vehicles, not forgetting the increasing number of cheaper and lower governance routes for improving investment efficiency, such as using smart beta, notably in the alternatives space,” said Mr. Morrow.

2014 PEPD • Private Equity’s Leading News Magazine • 7-14-14

Sean Ozbolt Joins Aurora Resurgence as New Partner

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Aurora Resurgence, an affiliate of Aurora Capital Group, has appointed Sean Ozbolt as a Partner. Mr. Ozbolt has seventeen years of private equity and credit investment experience across a variety of industries, including industrial manufacturing, consumer products, healthcare, business services and energy. He is based in the firm’s Los Angeles office.

“We are delighted to strengthen our leadership team with the addition of Sean and look forward to drawing on his proven capabilities in all stages of the investment process, as well as his operational, strategic and financial management expertise,” said Steven Smith, Managing Partner of Aurora Resurgence.  “Sean’s broad network coupled with his extensive transaction and management experience will prove beneficial as we continue to grow our portfolio in our second Resurgence fund. With a strong team, a broad and flexible mandate and a substantial capital base, Aurora Resurgence II is well positioned to capitalize on complex middle market opportunities in a wide variety of industries and geographies.”

Prior to joining Aurora Resurgence, Mr. Ozbolt served as Managing Director at Bayside Capital, an affiliate of H.I.G. Capital.  At Bayside Capital, he was a senior member of the special situations investment team, leading distressed private equity and opportunistic credit investments for H.I.G. Capital. Prior to joining Bayside in 2005, Mr. Ozbolt was an Associate at Saunders, Karp & Megrue, a middle market private equity firm managing over $1.5 billion of equity capital. Prior to Saunders Karp & Megrue, Mr. Ozbolt worked at J.H. Whitney & Co., with a focus on investing control and minority equity and mezzanine debt capital. Mr. Ozbolt started his career at First Union Securities as an Analyst in the Leveraged Finance Group. Mr. Ozbolt received a BS in Commerce from the University of Virginia.

“It is an honor to join Aurora Resurgence’s seasoned, high-quality team. Aurora has a proven business strategy supported by long-standing investors and I am excited by the numerous prospects for future growth,” said Mr. Ozbolt.

Aurora Resurgence closed its second resurgence fund, Aurora Resurgence Fund II LP in October 2013 with $550 million in capital commitments.  Resurgence Fund II continues Aurora’s strategy of investing in the equity and junior capital of middle market companies, seeking controlling positions in complex situations created by operational or financial challenges (www.aurorares.com).

“Sean’s appointment to Aurora Resurgence will be highly complementary to our existing world-class team. I am confident that his deep understanding of value creation in distressed private equity and opportunistic credit investments will enable him to bring meaningful insights to both our current and prospective investments,” said Gerald Parsky, Chairman of Aurora Capital Group.

Aurora Capital focuses principally on control-investments in middle-market industrial, manufacturing and service oriented businesses. The firm, founded in 1991, has $2 billion of capital under management and is headquartered in Los Angeles (www.auroracap.com).

2014 PEPD • Private Equity’s Leading News Magazine • 7-14-14

Ampersand Acquires MicroTest Labs

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ATS Labs, a portfolio company of Ampersand Capital Partners, has acquired the assets of MicroTest Labs, a provider of testing services for the medical devices.

MicroTest Labs (MTL) is a provider of testing services for the medical device, pharmaceutical and biotechnology industries.  The services provided by MTL enhance product safety and security, speed time to market, and minimize supply chain disruption.  The company was founded in 1984 and is based in Agawam, MA (www.MicroTestLabs.com).

ATS Labs is a provider of antimicrobial and biocide testing services, Customers include developers, manufacturers, and users of antimicrobial products. The company is based near Minneapolis in Eagan, MN (www.ATS-Labs.com).

The acquisition of MTL is the first step in the strategy of ATS to expand its microbiology and chemistry laboratory services platform to support the medical device and biopharmaceutical industries.  The combined companies will soon be known as Accuratus Lab Services.  It is expected that administrative functions will be consolidated, but the company will continue to operate at its locations in Eagan, MN and Agawam, MA.

“The acquisition of MicroTest by ATS has been a long time in the making and I could not be more pleased about the future of the two companies and how they will combine to create the market leader in providing microbiology and analytical chemistry testing services,” said Dr. Steve Richter, CEO of MicroTest Labs.

Ampersand Capital Partners makes middle market growth equity investments in the healthcare sector. Over the past twenty years, Ampersand has raised seven funds and invested in more than forty private healthcare companies. These activities have produced a 24% net pooled internal rate of return to the firm’s limited partners. Ampersand is based in Wellesley, MA (www.ampersandcapital.com).

“Like ATS, MicroTest has a strong reputation in the industries it serves, which is supported by long-standing client relationships. Leveraging the strengths of the two companies will only further enhance our ability to continuously exceed our client’s expectations,” said Dr. Tom Burnell, Executive Chairman of ATS.

 2014 PEPD • Private Equity’s Leading News Magazine • 7-14-14