British investment firm Northill Capital said Tuesday that it has agreed to acquire a majority stake in Riverbridge Partners, LLC—a 25-year-old Minneapolis-based private investment firm that manages nearly $4 billion.
 
Northill didn’t reveal the financial terms of the deal but said its investment represents approximately 58 percent of Riverbridge’s equity. Northill is buying out 100 percent of the equity of the firm’s former partners and “just under 50 percent” of the equity of the existing management team—which is led by founder and Chairman Mark Thompson.
 
In a prepared statement, Thompson said that Riverbridge has a young management team but still must address succession—which the investment will do by allowing retiring and former partners to cash out some of their equity and by letting younger principals invest in the firm.
 
“Many firms never solve this problem, which is why they are either sold or experience a collapse when the founder departs,” Thompson said. “Our partnership with Northill ensures that Riverbridge will remain an employee-owned firm and, importantly, enable us to more easily broaden our equity ownership to the next generation of leaders.”
 
Riverbridge, which employs 28, invests in small, mid-, and large-cap U.S. equity growth portfolios for institutional and high-net-worth investors. It routinely outperforms its benchmarks, which include the Russell 3000 and S&P 500 indexes.
 
Northill, meanwhile, was founded in late 2010. According to its website, it “intends to provide equity and seed capital to a small number of high-quality start-ups or early stage managers and to provide equity capital to replace existing shareholders in larger, more established asset managers.”
 
Joe Little, a Northill Capital partner who has reportedly known Thompson for years, told the Star Tribune that Riverbridge is the fifth of roughly 10 investment boutiques in which Northill is investing to build a diversified portfolio.
 
Riverbridge plans to roll out a public, mutual fund version of its “Riverbridge All Cap Growth Portfolio” on January 1. A Riverbridge spokesman said Tuesday that a mandatory 75-day process through which the mutual fund will become registered with the U.S. Securities and Exchange Commission begins Wednesday.
 
Northill said that its strategy aims to ensure that management retains “a high degree of autonomy,” and thus Riverbridge will remain in Minneapolis and continue to be led by its current management team. Members of the Northill management team will, however, join Riverbridge’s board.
 
All Riverbridge board members will remain in place, and the number of managers who own equity will grow over time, Northill said. Current equity owners will hold all remaining equity for at least five years, and each will reinvest half of their net proceeds in Riverbridge’s investment strategies.