NuSource Financial

Company

Headquartered in Eden Prairie, Minnesota, NuSource Financial is a bank technology, equipment, and security systems provider focused on serving regional financial institutions.

Objective

In 2015, NuSource CEO Jon Erpelding sought a partner to help him execute a growth strategy. He recognized that bank technology was changing rapidly and wanted to capitalize on the opportunity, but he knew that doing so would require additional capital and other resources. Tonka Bay was introduced to Erpelding through a mutual connection, and the firm was a good fit given its background in similar businesses and situations.

“Tonka Bay was transparent from the start, and it was clear that they take more of a partnership approach,” Erpelding said. “I sensed that they really believed in our business model and wanted to invest in our people and help develop the right processes.”

In partnering with Erpelding and the NuSource management team, Tonka Bay leveraged its recent experiences with similar business services companies to help structure a transaction that would provide liquidity to NuSource ownership and capital for growth. “They took a lot of time to listen and learn our business,” Erpelding said. “I sensed right away that they wanted to invest in our people and help us develop the right processes. That approach sets them apart.”

Plan

After finalizing the transaction, Tonka Bay and Erpelding developed a roadmap for executing his vision for the business. Erpelding was introduced to Tom Adamson, a Tonka Bay operating partner, who joined the NuSource Board shortly thereafter.

Erpelding and Adamson worked closely to size up the evolving market and develop strategies to get ahead of upcoming changes. As more financial institutions were choosing managed services agreements (MSAs) over one-time equipment sales, NuSource quickly became a leader in offering MSAs in addition to providing customers its best-in-class Interactive Teller Machines (ITMs) and other products.

The two also worked together to enhance the management team, developing a profile for two new positions to round out the group: a VP of Operations and VP of Finance. The team worked with an executive recruiting firm from Tonka Bay’s network to fill the new positions — both of which proved central to the significant value NuSource created as a Tonka Bay partner company.

NuSource and Tonka Bay implemented a management framework that helped establish priorities and focus on key initiatives. The team developed a plan to grow revenue by increasing density in existing markets, expanding geographically to new markets and customers, and capitalizing on bank branch transformation trends. In addition, two add-on acquisitions were completed to further expand the company’s geographic footprint while adding new talent and incremental service offerings.

Results

While NuSource was a Tonka Bay partner company, revenue and EBITDA doubled, employment increased 22%, and recurring revenue grew to more than 30 percent of the business. The sales pipeline also expanded significantly, driven by new customer activity and geographic expansion. This performance contributed to increased value for shareholders and continued momentum for success under new ownership.

“I thoroughly enjoyed working with Tonka Bay, and they were there any time I needed input on key decisions for the business,” Erpelding said. “Their guidance was critical as our management team executed our strategy to strengthen our foundation and offer new value-added technology to our customers. We left the partnership in an excellent position to continue to grow and thrive well into the future.”