EDEN PRAIRIE, MINNESOTA –Â Norwest Equity Partners (NEP), Minnesota’s largest private equity firm, and Split Rock Partners have purchased a controlling stake in Amcom Software. Financial terms were not disclosed.
Amcom makes software that helps hospitals integrate communications. For instance, doctors and nurses normally carry multiple devices like internal and external pages and smart phones. The company’s Mobile Connect technology allows hospital staff to carry one device that receives critical code calls, consulting requests and regular texts and e-mail messages.
The result is greater patient satisfaction and safety, said Tom Schauerman, principal at Minneapolis-based NEP.
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“It allows patient needs to be met more accurately and efficiently,” Schauerman said. Amcom “has accomplished quite a bit in a short period of time. They have a nice product and a good position to grow.” He also noted Amcom delivers high returns on investments because its products are “sticky,” that is, hospitals tend to stay with the technology once they use it.
Customers include Duke University, Cedars-Sinai Medical Center, Children’s Hospital Boston and Memorial Sloan-Kettering Cancer Center.
Amcom CEO Chris Heim, business partner Dan Mayleben and Garvin Hill Capital Partners purchased the company in 2007. Last year, the company said revenue grew more than 40 percent.
The deal marks the first investment out of NEP’s $1.2 billion Fund IX, which closed September 2008. What makes the deal even more interesting is NEP’s partnership with Split Rock, a prominent venture capital firm based in Eden Prairie.
Buyout firms are a different world from VCs. For one thing, private equity traditionally relies on credit to finance outright acquisitions of later stage companies; VCs pay cash for equity in early stage start-ups. Private equity tend to look for exits in three to five years while VCs normally adopt a five- to ten-year outlook.
But with credit markets still tight and VC money in short supply, investors are finding creative ways to fund deals. The Amcom transaction was too big of an investment for Split Rock to make alone, said managing partner Michael Gorman. NEP was a good partner because the firm has a good record for funding growth companies, he said.
“If a good opportunity presents itself, we have to be creative to make it happen,” Gorman said.
This isn’t the first time Split Rock has worked with a private equity firm. In 2006, Split Rock partnered with Warburg Pincus to purchase Tornier, a Minneapolis-based orthopedics company.
Split Rock is one of the few local VCs to invest in early stage companies. But the company has been leaning toward more advanced businesses. About 20 percent of Split Rock’s portfolio consists of later stage companies.
Schauerman of NEP said Amcom will probably make two or three acquisitions to buttress its already nice organic growth rate. Selling Amcom to another buyer is the mostly likely exit scenario, he said.
