Jason Sondell, Managing Director, Norwest Equity Partners
Jason Sondell, managing director at Norwest Equity Partners, spoke with Invest: about working with companies to realize and achieve their goals. “We take a shoulder-to-shoulder approach, working alongside management teams to align in a shared vision and scale businesses effectively.”
Reflecting on the last year, what have been the main highlights and key milestones for Norwest Equity Partners?
We had a successful 2024 after a busy 2023. Late in 2023, we transitioned from managing capital on behalf of a single institution to a broader group of investors, reinforcing our commitment to long-term value creation. In June 2024, we closed our most recent fund, NEP XI LP, with approximately $1 billion in capital. We closed one new platform investment in 2024 after two in late 2023: Nationwide Organ Recovery Transport Alliance (NORA), a leading transportation and logistics provider to facilitate organ transplantation; United Sports Brands, a portfolio of sporting goods and active lifestyle brands; and MDC Interior Solutions, a provider of commercial interior finishes. We’ve completed several tuck-in acquisitions for a couple of our platform companies. We sold Minnesota-based Bailiwick, a leading provider of custom IT solutions for Fortune-500 companies and other types of large-scale IT infrastructure. We also exited a company called Surgical Information Systems, the leading provider of surgical software for operating rooms. We refined our NEP Performance Engine, our customized value creation framework, to help portfolio companies achieve operational efficiencies, leadership development, and revenue growth. We augmented this by adding to our pool of functional and industry resources which we provide to our companies – several industry executives joined our team to help our companies grow and create value.
What are the main industries and sectors driving growth and demand for NEP?
We focus on partnering with companies across three primary sectors: business services, consumer products and services, and industrial growth. We call these “center of the fairway” industries. We don’t invest in sectors that are highly regulated and high-risk. We focus on situations where we have experience, resources, and insights that allow us to unlock significant value for a company. Sometimes it comes in the form of a strategic insight, and other times it comes in the form of us partnering with a company to provide it with the framework and resources it needs to scale the right way.
What is your overview of the economic and business landscape in the Twin Cities, and what makes the region a great investment market?
The Twin Cities market remains strong, driven by a diverse economy across healthcare, financial services, manufacturing, and tech-enabled services. The Twin Cities along with the upper Midwest market as a whole, is an attractive place to invest – NEP has a long history of investing in this region. Labor tightness continues to be a challenge. Investments in automation, digital transformation, and workforce upscaling can help to mitigate some of the labor challenges. We’re seeing inflationary pressures and interest rate fluctuations, which have impacted activity for us. Companies with solid fundamentals, however, are still attracting capital.
What workforce development initiatives and programs are NEP implementing in order to build and retain a skilled and talented labor force?
We have a range of functional and industry veteran executives on our portfolio advisory team who work closely with our family of portfolio companies. They act as advisers, consultants, and strategic partners to help our companies drive growth, increase performance, and fine-tune foundational excellence. It’s an integral part of our value creation framework. We focus on training and information-sharing, including governance processes and initiatives to build high-performance teams.
Have there been any changes in the legal and regulatory landscape affecting NEP’s client companies?
There’s been an increased level of antitrust scrutiny that we are monitoring, as well as increased labor and employment regulations around workers’ rights, wages, and benefits. Tax and compliance are always an area of focus, such as a regulatory shift around tax policies. Consumer protection and data privacy are legal and regulatory issues we are keenly following.
What are the primary challenges, obstacles, and economic hurdles affecting NEP’s client companies?
We are in a higher interest rate environment compared to the last several years, which has made leveraged buyouts more expensive and places pressure on portfolio companies with variable-rate debt. We’re seeing inflation and cost pressure across many of our portfolio companies. Rising labor costs, supply chain disruptions, tariffs, and input price inflation have all squeezed profit margins. Attracting and retaining talented employees is challenging. Economic uncertainty can make it difficult to exit existing companies and evaluate new opportunities – uncertainty breeds uncertainty. There’s a lot of dry powder in the private equity market, meaning there’s a lot of capital out there looking to be put to work, which has driven up valuations, especially for A-quality assets. It’s a binary market where grade-A companies are selling for high valuations, and other companies are waiting.
How is NEP leveraging technology and innovation to provide the best advisory, consulting, and strategic services to clients?
We’re always focused on how we can leverage technology and innovation, both internally and across our portfolio, to improve how we operate and perform. We work with our companies to drive data insights with analytics and automation to enhance operational performance. We spend a lot of time helping companies integrate ERP systems, e-commerce platforms, digital marketing, and AI strategies. We work with our companies to ensure they have the right foundation of IT infrastructure and compliance protocols to protect business against emerging threats.
How does Norwest Equity Partners invest with a business-owner mindset and help companies realize their vision, and what investment strategies do you practice?
We invest in our businesses with a business owner mindset which means that we’re constantly partnering with our companies to help them realize their vision. We focus on long-term value creation rather than short-term financial engineering. We take a shoulder-to-shoulder approach, working alongside management teams to align on a shared vision and scale businesses effectively. This is where our NEP Performance Engine comes into play. We ensure our portfolio companies are equipped for sustained success with the resources they need to achieve our aligned strategies. We work side-by-side to identify opportunities, overcome challenges, and help them succeed. This has been our approach for over 60 years and is key to what we do.
What is your outlook for NEP in terms of goals and priorities for the next two to three years?
Our first priority is scaling our portfolio, identifying more high-potential businesses with EBITDA between $10-50 million and deploying strategic capital with $75-175 million equity checks. We want to grow our existing companies by leveraging our value creation framework and through strategic bolt-on acquisitions and investments. We want to continue investing in our team with mentoring and leadership coaching. If we can accomplish these goals and continue our legacy of championing middle-market companies, we will have deemed the near future a success.
