The Riverside Company, the largest private equity firm investing in premier companies at the smaller end of the middle market, has big plans for small companies. The firm announced today that it has closed its Riverside Micro-Cap Fund I (“RMCF”) at $250 million, more than 67% above its target of $150 million. RMCF is an innovative private equity fund that makes control investments in leveraged acquisitions of North American micro-cap companies, which Riverside defines as enterprises with revenues of $5 million to $25 million and EBITDA of $3 million or less. In order to ultimately achieve an earnings level in excess of $10 million at exit, the Fund expects to hold these portfolio companies for approximately 7 to 10 years, considerably longer than the standard leveraged buyout model. In addition, Riverside will continue to acquire companies in its traditional range of up to $100 million in enterprise value in North America using its $750 million 2003 Riverside Capital Appreciation Fund (“RCAF ‘03”), and in Europe using its Riverside Europe Fund.

“The micro-cap market is ripe with exceptional investment opportunities,” said Stewart Kohl, who is Co- Chief Executive Officer of The Riverside Company along with Béla Szigethy. “These small companies represent a large and relatively untapped investment opportunity, with a universe of over one million microcap companies in the United States alone. With our world-class marketing and deal sourcing programs and our 18 years of small deal experience, Riverside is uniquely positioned to capitalize on this special market.”

Despite the small size of the target companies, RMCF’s investors include some of the world’s largest and most sophisticated institutional private equity investors, including clients of Meketa Investment Group, State of Michigan Retirement Systems, AlpInvest Partners, Makena Capital Holdings, RCP Advisors, and Credit Suisse’s Ohio Public Employee Retirement System/Ohio-Midwest Fund.

“We are delighted and gratified by RMCF’s oversubscription and the response from Riverside’s existing investors who put up virtually all of the capital for RMCF,” remarked Kohl. “At a time when attention is riveted on the mega-firms doing mega-buyouts through mega-funds, we and they see the opportunity to pan for golden nuggets and to refine and shape them into valuable ingots.”

“There’s tremendous potential for value creation in this segment,” added Szigethy. “We’re eager to apply Riverside’s considerable resources, skills and strategies to grow these companies through active operating involvement, add-on acquisitions and high organic growth.”

Riverside’s position as one of the most active financial buyers at the smaller end of the middle market gives it access to potential acquisition candidates that few institutional investors have and strengthens its reputation as a partner for smaller companies that are looking to grow. The Riverside Micro-Cap Fund has already acquired the following eight companies since July 2005 and plans to share news regarding a ninth acquisition before the end of the month:

• Adventures in Advertising – Franchisor of individually owned and operated promotional product and corporate apparel distributors.
• Thibaut – Designer of upscale wallpaper and fabric sold through the interior decorator channel.
• RCS Management Corp. – Provider of respiratory care equipment, products and services to nursing homes.
• Express Courier – Regional provider of same-day and on-demand delivery and logistics services for time-critical shipments.
• LocalTel – Publisher of more than 167 community-based yellow pages directories.
• American Safety & Health Institute – Nationally recognized professional safety and health publishing and certification business.
• ActivStyle – Regional mail order provider of incontinence and other healthcare products.
• PROFITsystems – Leading provider of Windows-based retail furniture software solutions.

Riverside has created a dedicated team of 14 staff members for RMCF, with several additional hirings in the offing. RMCF is led by two senior professionals: Riverside Partner Loren Schlachet heads up the transacting process, while Ron Sansom, who was recruited from a senior post at Honeywell, serves as the Senior Operating Partner of RMCF. At Honeywell, Sansom headed an $800 million business unit. Prior to that, he was an executive at GE and Kinetek. Experienced managers Matt Schafer and Jeff Tobin are working closely with Ron as Operating Partners. In addition, the firm has hired Dan Stankey as the Chief Financial Officer of the micro-cap company portfolio to evaluate financial systems, hire financial staff where needed, and implement systems and controls.

“Loren has been with Riverside for over six years and is one of our most productive and accomplished partners. Ron was the product of a six-month search and brings to this position the precise skills and experiences we sought,” said Kohl. “He is a proven manager with a track record of growing businesses both organically and through add-on acquisitions. Béla and I are confident in the abilities of Ron and Loren to manage the strong team they have assembled, build an impressive portfolio and drive the development of RMCF’s portfolio companies in an extremely hands-on, operating intensive manner, thereby continuing Riverside’s tradition of delivering consistently superior returns to its investors.”

The entire RMCF team consists of the following professionals: Loren Schlachet – Partner; Ron Sansom – Senior Operating Partner; Dan Stankey – Chief Financial Officer; Matt Schafer – Operating Partner; Jeff Tobin – Operating Partner; Joe Lee – Vice President; Dave Krasne – Senior Associate; Jack Nestor – Senior Associate; Brian Sauer – Associate; Eric Keen – Analyst; Joe Manning – Analyst; Kenny Shum – Analyst; Molly Ryan – Office Manager; and Marjorie Moats – Administrative Assistant.

More information on The Riverside Company can be found at www.riversidecompany.com and www.riversideeurope.com.