Norwest Equity Partners (NEP) and Norwest Mezzanine Partners (NMP), affiliated middle market investment vehicles based in Minneapolis, Minnesota, have launched their most recent funds, with combined capital commitments of $1.7 billion (€1.6 billion).
NEP IX raised $1.2 billion in commitments and NMP III raised $500 million in commitments. Together, they will bring NEP and NMP’s total capital under management to $4.6 billion, more than $1 billion of which will be on the mezzanine side. Both funds closed in June and are now investing.
Our basic business is to be a control investor. On a dollar volume basis, that is 85-plus percent of our portfolio.
Tim DeVries, NEP and NMP managing general partner
The sole LP for the new funds, as with all of Norwest’s previous debt and mezzanine funds, was Wells Fargo Bank, which has had a continuous relationship with Norwest since its inception in 1961. Norwest’s general partners also committed to the funds.
Tim DeVries, managing general partner at both funds, said that the funds’ investment strategies and objectives will stay the same as that for previous funds and that both will have a 4 year investment time horizon.
“We like strong middle market companies that we can turn into better companies,” DeVries said, defining middle market as companies with enterprise values between $100 million and $500 million dollars. While NEP will typically make investments of $50 million to $150 million, NMP will invest $10 million to $50 million per transaction.
Another aspect of the funds’ strategy that will remain unchanged will be their focus on taking majority positions in their investments. “Our basic business is to be a control investor. On a dollar volume basis, that is 85-plus percent of our portfolio,” DeVries estimated. The remainder consists of minority co-investments.
While the funds do sometimes invest together – DeVries says that this happens about one-third of the time – neither is captive to the other and so the majority of their investments will be done separately.
NMP III has already funded its first transaction: a $40 million subordinated debt investment supporting Wind Point Partners’ recent acquisition of Minnesota-based branded food packager Ryt-way Industries. Previous NMP funds have investments in industrial products, consumer products, business services, healthcare and restaurant sectors. Though their typical financing structure is subordinated debt, DeVries said that NMP is open to “creative structuring” that may involve co-investment or a preferred equity portion.
NEP IX has yet to make its first investment, but previous sectors have invested in manufacturing, distribution and services companies within a variety of sectors. Management buyouts, recapitalizations and growth financings are the funds’ typical transaction structures.