Riverside exit results in 3.2x return

The Riverside Company has completed its sixth exit this year with the sale of Inscape Publishing, a developer of technology-based corporate training solutions, to New York-based private equity firm Sentinel Capital Partners. Terms were not disclosed, but Riverside said the sale generated a 19 percent internal rate of return and a 3.2x return on its original investment.

Riverside, a lower middle market buyout firm based in New York and Cleveland, Ohio, bought Inscape in 2000 from Carlson Companies, a marketing, travel and hospitality company. Since then, the firm has helped Inscape to develop new technologies and strengthened Inscape’s management team, said Riverside principle Kristin Newall.

Riverside helped Inscape to transition from producing paper-only materials to producing paper and web-based applications. In addition, when Riverside bought Inscape, the company produced only materials for assessing employees’ attitudes and behaviours. During Riverside’s ownership, Inscape expanded its offerings to include training materials for improving employees’ time management, efficiency and interpersonal interactions, among other skills, Newall said.

In 2003 Riverside also bought Discover A/S, a Denmark based company that offered products similar to Inscape’s, as an add-on to Inscape, helping Inscape to expand its European presence. Denmark is now Inscape’s international headquarters.

The final element of Riverside’s strategy for Inscape was the hire of four new senior managers, including president and chief executive Jeff Sugerman. Sugerman has both an academic and business background: he earned a doctorate in psychology and has held positions at Pearson’s National Computer Systems , IT testing and training business Virtual University Enterprise and interactive product visualisation company Point Cloud.

“Jeff really came in and brought new life to the business, especially in terms of product development,” Newall said.

Riverside saw 22 percent revenue growth for Inscape at the end of June 2007 and EBITDA of 38 percent for the same period, according to a statement.

Sentinel partner Paul Murphy said his firm found Inscape’s strong management team and its prospects for international growth attractive.

“Right now we’re in 22 countries, but we’ve still only scratched the surface in terms of our international business,” Murphy said.

Murphy also said that during Sentinel’s due diligence, the firm found that many of its other portfolio companies use Inscape’s products.

“When guys that you respect are telling you that they use this product, it’s comforting,” Murphy said.

Inscape is Riverside’s sixth exit this year. Earlier this month, the firm sold oil and gas robotics company Welltec Holdings to US buyout firm Summit Partners for a 9.9x return on its original investment.

The firm closed its third Europe fund on €315 million last month. The fund exceeded its initial target of €250 million ($337 million), and is nearly 10 times the size of the firm’s last European fund, which closed on €38 million in July 2002.