Global investment and private equity (PE) firm The Riverside Co has started investing its Riverside Australia Fund (RAF) IV and expects to announce its first investment before the end of June, said Riverside Managing Partner Simon Feiglin.

As per US Securities and Exchange Commission (SEC) filings, Fund IV was launched in November 2023 and is targeting an up to AUD 450m (USD 293m) close.

Feiglin declined to comment on the progress of the fundraising but told Mergermarket the firm plans to invest in about nine to 12 companies from the fund. “We look at roughly 400 opportunities per year across Australia and New Zealand to invest in about four to six per year, so a ‘strike rate’ of about 1%,” he said.

In line with its specialist focus on the low end of the mid-market, Riverside Co is seeking companies with up to AUD 25m EBITDA, strong margins, capital efficiency, and high growth potential, Feiglin said, noting that it always welcomes approaches from advisors with potential targets.

It mostly targets B2B players in business services, technology, and healthcare, which are sectors it knows well, enabling it to “partner” effectively, Feiglin said, explaining that its model supports founders that want partial liquidity events but are willing to stay on to continue to play a part in growing their businesses.

Riverside, which takes controlling, “but rarely 100%” stakes, helps investees accelerate growth, both domestically and internationally, via both organic and acquisitive means, Feiglin said. A key differentiator in the local market is that Riverside Co raises dedicated domestic funds, meaning that it is not “saddled” by, but benefits from, its parent’s extensive global reach and network, he added.

Since 2007 Riverside Co has completed 40 investments from three funds in Australia and New Zealand. Its vintage USD 75m 2007 RAF I and USD 235m 2012 RAF II have been fully realised, Feiglin said.

In bolt-on mode

Riverside Co’s 2019 vintage AUD 352m RAF III fund has been fully invested into seven companies, and with an average hold time of more than five years, it is currently “more in growth and bolt-on” rather than exit mode for these, Feiglin said.

As reported by Mergermarket, Riverside Co is actively looking for acquisitions for EventsAir and Independent Living Specialists.

It is continuing to look for acquisitions that can expand the product range for workplace health and wellbeing portfolio company, Altius Group, Feiglin said, noting that it has made four acquisitions since investing in the company in 2021. Altius Group had a score of 21 out of 100, according to Mergermarket’s Likely to Exit algorithm.*

Having invested in clinical research organisation (CRO) Avance Clinical in November 2021, Riverside Co took the company into North America in September 2022 with the acquisition of CRO partner company C3 Research Associates, and is looking for add-ons, primarily across the US and Europe, he said.

Riverside Co has completed several small add-ons for Healthcare Operations Solutions, which provides time-sensitive transport to the healthcare and medical industry, and is continuing to look for others, Feiglin said, noting that Riverside Co invested in the company in 2021.

Skincare brand Alpha-H, in which Riverside Co invested in April 2019, is the only asset in RAF III that is growing purely organically, Feiglin noted.

On the exit front

Feiglin expects PE dealmaking in 2024, on both the buy- and sell-sides, to be “materially” better than 2023, as interest rates and unemployment have stabilised, inflation has come down, and valuations are also stabilising.

“We are finding we can and expect to continue getting to outcomes with vendors who are willing to base valuations on 2022 and not still hoping for 2021 valuations,” he said.

Riverside Co has already announced two exits so far this year. It sold Australasian infrastructure services company Hiway Group to New Zealand PE firm Direct Capital for an undisclosed sum in February, and is close to completing the sale of simulation software provider Energy Exemplar to Blackstone and Vista Equity Partners reportedly for some AUD 1.6bn.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.