Deal in focus: Riverside scoops Mec3

After a three-year courtship, Riverside acquired Italian gelato ingredients maker Mec3 in late February.

"We first met the company more than three years ago," explains Riverside partner Karsten Langer, who led the deal. "At the time, the company was selling a minority stake, which didn't work for a number of reasons. But we stayed in touch. It's been a long gestation period, but sometimes that's good – it gives you time to get to know each other."

Negotiations for the deal began around nine months ago. Riverside completed the majority of the due diligence before approaching co-investors and lenders in autumn 2013. Equity co-investment was provided by Lexington Partners, Intermediate Capital Group (ICG) – which committed €10m – and a large family office. Debt financing was provided by ICG, which supplied an €80m unitranche facility, and GE Capital Interbanca. ICG invested from ICG Europe Fund V, which is now 52% invested.

Having sold Italian swimwear brand Arena, founded by the son of Adidas-founder Horst Dassler, to Swiss mid-market fund Capvis in December 2013, Italian companies were absent from Riverside's portfolio. The GP recently scaled back its Spanish operations, downsizing its Madrid office as part of a realignment of its European strategy. The firm will continue to source investments in Iberia and support its existing portfolio, but only two members of staff will remain in Madrid. Will its approach to Italy change?

"It's hard to generalise on a country. We are all about finding small gems across Europe," says Langer. "Italy is a market that really suffered during the financial and sovereign debt crises. It was under-invested for a while. We bought Arena in 2010 and then really started looking at what's best in Italy: strong brands, which benefit from Italian heritage and retail internationally."

Based in San Clemente and established in 1984, Mec3 develops and manufacturers ingredients for gelato, pastry and other foods. The firm has annual revenues of €100m, up from around €20m in 2002, and retails to more than 600,000 customers. Exports to more than 100 countries account for 80% of the firm's revenues: "It's a strong brand that's essentially selling a little piece of Italy internationally – those are characteristics we find very attractive," says Langer.

Global appeal
"The company has been very successful and has grown very quickly. We want to help maintain its position and help it to grow outside of Europe in particular," says Langer. The GP will focus its efforts on boosting the firm in North America and Asia, where the company already has clients in Korea and China. "It's also very popular in Brazil, where it operates through a subsidiary. It's doing very well over there as it is summertime at the moment," Langer adds.

Riverside also plans to introduce a financial director and may make some staffing changes to facilitate the firm's international growth, though the current management team will remain at the helm. "It's important to be able to count on the team. They are the team that are responsible for the company's strong growth so far, so we want them to continue," says Langer.

People
Riverside – Karsten Langer, Rafael Alvarez-Novoa, Damien Gaudin, Fabio Pesiri, Tomasz Glowaxki
Intermediate Capital Group – Luigi Bartone

Advisers
Equity – Allen & Overy (Legal); Bain & Co (Commercial due diligence); PwC (Financial due diligence); Deloitte (Corporate finance).
Company – BLF Studio Legale (Legal).

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