The ETA Landscape: More Complex, More Promising

The world of ETA has never been more vibrant—or more competitive. Entrepreneurs, MBA programs, and investors are flocking to this space, drawn by the opportunity to unlock alpha in small businesses. Yet, with this increased attention comes heightened competition for high-quality assets, a wider dispersion of outcomes, and more visible failures.

At NGP, we’ve stayed true to our core strategy: partnering with exceptional entrepreneurs to acquire and grow businesses that provide mission-critical, non-discretionary services at attractive valuations and structures. These businesses may not be flashy, but they are the backbone of the economy—and they represent one of the most resilient opportunities for value creation in today’s investment landscape.

While public markets continue their unpredictable climb—seemingly divorced from economic fundamentals—we see the ETA model as a steadfast alternative. Small businesses, backed by disciplined leadership and thoughtful growth strategies, remain the most compelling vehicles for sustainable, attractive risk-adjusted returns.

2024 in Review: Progress with Purpose

This year, we deepened our commitment to quality over quantity:

• Investments: We made strategic acquisitions, expanding our portfolio thoughtfully. While we didn’t hit every ambitious target, we upheld our commitment to disciplined decision-making. The businesses we invested in are positioned for long-term success.
  • The acquisition of QNS furthers our conviction in the IT MSP model, marking our second platform investment in the space, first serving the K-12 education market.
  • Morris marks our first investment in the commercial HVAC space. This sector, with its high fragmentation and large total addressable market, offers compelling opportunities when value can be identified. Morris is the first, but very likely not the last, investment in this space.
• Talent: Our Entrepreneurs-in-Residence (EIRs) remain at the heart of our model. In 2024, we welcomed five talented, mission-driven leaders who will build on our legacy. If you haven’t spent time with Javier, Matt, Josh, Ben, or Charlie — find time to do so. You’ll come away inspired and excited for each of their searches.
• Technology: Across our industry, technology and AI are driving transformation. These tools are no longer optional; they are prerequisites for staying competitive. This year, we made significant upgrades to Firm Operations and Search processes. The biggest step we’re taking is to integrate Salesforce across the firm, in large part because of its scalability and flexibility. Beyond that, we’ve also begun to wade into the world of AI tools to support functions across the firm.
• Network: We doubled down on partnerships—with our team, investors, portfolio companies, and each other—hosting more gatherings than ever before. These investments have led to impactful new board members, investors, and mentors for portfolio company leaders.
• Deal Pipeline: Our pipeline going into 2025 is strong, with two companies under LOI and several more on deck. We’re poised for an exceptional year ahead.

Capital and Performance

On the capital front, 2024 was transformational:

• Fund III: We held one close at our $165M hard cap, with an LP base that understands the power of pairing talented operators with proven businesses.
• Fund Performance: Fund I is tracking toward top decile returns. Fund II, while still early, is on a solid foundation.
• Exits: The successful exit of ConData underscores the enduring value of “boring” businesses when run with operational excellence.

We’ve also learned a great deal. Not every plan went as expected, and not every decision turned out perfectly. For example, while testing the market for JMG, we determined there wasn’t a suitable buyer in its current form. We made a leadership change, and now the business is showing meaningful progress, with healthier financials and diversification. These moments reinforce our commitment to leading our work with our core values of Relationships, Rigor, and Results.

2025: Focused Ambition

Looking ahead, 2025 is about scaling what works, refining what doesn’t, and staying disciplined. Our focus includes:

• Platform Acquisitions: Expanding our portfolio with new platforms and targeted add-ons.
• Talent Expansion: Partnering with four new EIRs.
• AI and Automation: Continuing to integrate cutting-edge tools across the firm and portfolio.
• Exits: Positioning two companies for exit in 2026 and accelerating performance in more recent acquisitions.

Personal Note

This past summer, I attended a father-son hockey camp with my seven-year-old son, Patrick (or “Patch” as we call him). Those few days together were special for us. On the ice, I saw Patch push through challenges with resilience, learning to skate faster and play smarter. Off the ice, we grew closer by focusing on what matters most: trust, care, and shared growth. It took time, but it was worth every minute.

I’ve thought about that experience often as NGP has implemented a new team-wide system for leading our work. Just like that camp, implementing EOS over the past year has required clarity of priorities, discipline in execution, and trust in one another. Although it’s still early, the results have been powerful: a stronger, more aligned team and a clearer path forward. Whether on the ice or in business, there are core elements—focus, trust, teamwork—that make all the difference.

Closing

As 2025 picks up speed, I’m reminded of a simple truth: the greatest opportunities are often found in the hard-to-reach places. With the right people, the right businesses, and the right mindset, there is no limit to what we can achieve.

Thank you for your trust, partnership, and belief in what we’re building. Let’s make 2025 a year to remember.

With gratitude and excitement,

Brian O’Connor

Managing Partner