Norwest Equity Partners, the Upper Midwest's largest private equity investor, has raised a record $2.4 billion to invest in its trade of infusing debt-and-equity into small-to-midsize companies with growth potential.
The announcement Tuesday by Norwest also is a sign of confidence by its management and investors in the economy.
"It would be an understatement to say that this is an exciting time for our firm," Tim DeVries, Norwest's managing general partner, said in a statement. "[These funds] position us for great investments in the future."
Norwest Equity Partners, the oldest private investment firm in the Twin Cities, invests in private companies and typically holds them for four to seven years in anticipation of profitable growth and sale to other buyers or initial public offerings of stock.
The capital raised takes the form of two funds: Norwest Equity Partners X, a $1.6 billion limited investment partnership, and Norwest Mezzanine Partners IV, an $800 million limited partnership formed by Norwest Equity Partners' affiliated lender, to invest subordinated, higher-rate debt in support of private equity transactions sponsored by Norwest.
The firm, which employs about 50 investment professionals and others, said the recent round of capital is larger than its last capital raising of $1.95 billion in 2008. The firm also made internal and external hires and promotions related to the fundraising.
Since inception in 1961, Norwest Equity Partners has raised over $7.1 billion.
DeVries said he is concerned that an abundance of low-cost money has driven up the price of quality companies in what has become a sellers market. But the 58-year-old veteran said the Norwest model works over the long term.
"If we can continue as we have, we can weather and prosper during a variety of markets," he said. "On average, over the last 15 or 20 years, our companies double in size during our ownership of four-to-seven years. And double in profitability. That causes me to sleep well at night.
"I think we are good at identifying companies with strong business models, and we know how to work with management teams. That's a good formula through falling interest rates, rising interest rates. We borrow money but we don't overleverage companies. We work with the management to grow profitably and add employees. We've got a wonderful team here."
Norwest Equity Partners invests $50 million to $200 million per transaction across a variety of industries.
So far this year, Norwest has invested in Eyebobs, a Minneapolis-based brand of reading glasses, and Tennessee-based Old Hickory Smokehouse.
Other Minnesota investments over the years have included Apothecary Products, Life Time Fitness, Minnesota Rubber & Plastics and Gopher Resource.
Neal St. Anthony • 612-673-7144