Amy Or | Cleveland | Wall Street Journal

Three Riverside Co. executives are preparing to strike out on their own to tap investment opportunities in the lower midmarket sector.

Partners Steve Dyke and Chris Jones and Principal Rob Langley plan to set up a new investment firm called Align Capital Partners, people familiar with the situation said. Align Capital will invest within the business services and specialty manufacturing and distribution sectors from offices in Cleveland and Dallas.

Riverside confirmed the three executives have tendered their resignations, adding that the executives’ planned departure from the Cleveland firm is amicable and that they are transitioning from the firm in the next few months as they finish pending transactions with Riverside portfolio companies for which they are responsible. The three are long-standing executives with Riverside, particularly Messrs. Dyke and Jones, who have each been with the firm for more than a decade.

Mr. Dyke joined the firm in 2000, according to Riverside’s website, and served as its global head of specialty manufacturing and distribution. He was succeeded in that position earlier this year by Mr. Langley, a Riverside employee since 2010. Mr. Dyke, based in Cleveland, was a senior vice president at regional investment bank JD Ford & Co. before joining Riverside. Mr. Langley, based in Dallas, previously worked as a private equity associate at Bethesda, Md.-based American Capital.

Mr. Jones, also based in Cleveland, joined the firm in 2003, and has been active in the firm’s investments in business services and specialty manufacturing and distribution. Before Riverside, he was an associate at Chicago firm Keystone Capital.

The three executives handle portfolio companies managed by Riverside’s Capital Appreciation Fund, a buyout fund series that targets North American businesses with enterprise values of up to $250 million and earnings before interest, taxes, depreciation and amortization of $5 million to $25 million. Riverside is currently investing out of Riverside Capital Appreciation Fund VI, which closed 50% above target at $1.5 billion in 2014. The people familiar with the situation said Align wouldn’t compete with Riverside because it is seeking to back smaller companies than those targeted by Riverside.

The three executives have worked together on a variety of Riverside investments. All were listed among executives working on the 2010 purchase of G&H Wire Co., a manufacturer and supplier of orthodontic products.

Mr. Dyke and Mr. Jones were involved in the 2009 acquisition of Precision Wire Components LLC, a designer and producer of medical guide wires and other components used in minimally invasive medical procedures that Riverside exited in 2014; and the firm’s 2007 investment in boiler and water heater maker Aerco International Inc., which Riverside sold to Watts Water Technologies Inc. in 2014 for $264.5 million.

Mr. Dyke and Mr. Langley worked on Riverside’s 2014 investment in 3-D printing and design company Fisher/Unitech Inc. and in the firm’s backing of AEP Holdings Inc., a distributor of vehicle aftermarket replacement parts, last year.

Mr. Jones and Mr. Langley, meanwhile, worked on the 2011 acquisition of Emergency Communications Network Inc., a software-as-a-service provider of time-sensitive communications for government and education clients that Riverside exited in June 2015.

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