InSight

Exit and Growth Strategies for Middle Market Businesses

Another New Normal?

By Jim Gerberman | Mar 30, 2020

I have the privilege of being part of a group of business owners and leaders who meet routinely to help each other with issues and challenges related to pursuing their business and personal purpose. At a recent monthly meeting, one of our team presented each of our members with shirts that he had discovered during a trip to Hawaii. He shared the “Red Dirt Shirt” story as an example of a resilient business owner that had found success from a catastrophic event.

On September 11, 1992, the Hawaiian island of Kauai was devastated by Hurricane Iniki. According to their company website:  “Among the businesses affected was our small screen print shop. All of our white shirts waiting to be printed were drenched with water and stained with Red Dirt blown in from the storm. Instead of throwing out the shirts, we decided to dry them as they were. The T shirts, stained with the ultra iron rich Red Dirt soil and printed with Hawaiian based themes became a hit with locals and visitors alike.”  Today, the Red Dirt Shirts company has seven locations in Hawaii, Arizona and Utah and produces and sells more than 100,000 shirts per month.

Rather ironically, on the same day that our team received these shirts, an article in The New York Times reported that “China Identifies New Virus Causing Pneumonialike Illness”. Three days later, on 11 January, Chinese state media reported the first known death from an illness caused by this coronavirus.

A relevant question for each of us:  “Is there a Red Dirt Shirt story for you and your business in this time of unprecedented uncertainty?”  And:  “How might one identify and pursue such opportunities?”

I really like the suggestions recently shared by Mark Cuban:

  • Experiment with new ideas. Since you have holes in your schedule, it’s a great time to experiment with new lines of business and see what sticks. He also recommended brainstorming not only with your peers, but also with your competitors. They are all in the same boat. Try to figure out the best way to reignite the industry.
  • Really get to know your employees. Take the time to understand the individual circumstances of your employees and their families.
  • Clean up parts of the business you’ve been neglecting or haven’t had time for. Control what you can control. Rather than focusing on how bad it is, focus on how you can use this time to connect with your future customers.

A final thought from an article shared by a friend: “Crises teach us that CEOs aren’t expected to be as right as they are expected to be engaged”.

Stay safe. Stay healthy. Stay engaged.


This Week’s NEW NORMAL in M&A

By Dan Vermeire | Mar 24, 2020

What a difference a week or two can make! The world has gone to war against the Coronavirus, the DOW is down by a third, and most of the population is sheltering at home.

What does this mean to the M&A market? The answer is… it depends.

This crisis is unique. The financial crisis of 2008/09 nearly killed the banking industry. Banks were essentially closed – couldn’t or wouldn’t lend into deals. Most buyers were very shy and without the support of the banks, they had to work with limited capital. Naturally, times were very lean in M&A.

In this crisis, the banks are still open and interest rates are lower than ever. Most buyers are still flush with cash and want to put it to work. For the most part, the buy-side is still strong.

But for sellers and businesses in general, you need to look on a case-by-case basis. Some sectors are terrible. With the Saudi/Russia/US oil war, the O&G sector is not very attractive for buyers. Airlines, cruise lines, hotels and restaurants, and anything directly servicing them are very difficult targets now and for the foreseeable future. Many won’t survive.

However, some sectors are stronger because of the Coronavirus. IT Services is very strong, if their customer base isn’t tied to one of the sectors mentioned above. Healthcare continues to be strong. And most food companies are strong, especially ones in the “good for you” products. Many other sectors are strong too.

With some sectors being unattractive, the buyers’ universe of good targets has just gotten smaller. That means that companies in the strong sectors have become more interesting.

Keep in mind that many companies are scrambling to adjust to the new conditions and revamp their strategic plans. Many have travel restrictions and other logistical challenges. All to say that it is more difficult to engage and make progress on M&A deals. But, not impossible. With the right combination of buyer and seller, deals are continuing to move forward.


M&A Quarterly News In The Plastics and Rubber Industry Sector

By Jim Zipursky | Mar 17, 2020

The report below gives a good overview of the first quarter M&A activity in the Plastics and Rubber Industry Sector. M&A activity for North American based target companies in the Plastics and Rubber sector for Q4 2019 included 24 closed deals, according to data published by industry data tracker FactSet.

One of the notable lower middle market transactions closed in November when Tank Holdings Corp, a portfolio company of Olympus Advisors LLC, acquired Chem-Tainer Industries, Inc., doing business as Todd Enterprises, for an undisclosed amount. Olympus Partners is a private equity and venture capital firm. Chem-Tainer Industries engages in manufacturing plastic tanks. The company’s products include open top, water, bulk storage, split containment and septic tanks. Chem-Tainer Industries is headquartered in West Babylon, NY.

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M&A Quarterly News In The Consumer Retail Industry Sector

By Joe Sands | Mar 16, 2020

The report below gives a good overview of the first quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q4 2019 included 149 closed deals, according to data published by industry data tracker FactSet.

One of the notable lower middle market transactions was announced in November when RV Retailer LLC, a portfolio company of Redwood Capital Investments LLC, acquired Ocean Grove RV Sales, Inc. of St Augustine for an undisclosed amount. The acquisition would enhance and expand the business portfolio of RV Retailer in Florida. Ocean Grove RV Sales is located in Florida and retails new and used recreational vehicles.

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M&A Quarterly News In The Transport, Logistics and Supply Chain Industry Sector

By Peter Heydenrych | Mar 05, 2020

The report below gives a good overview of the first quarter M&A activity in the Transport, Logistics and Supply Chain Industry Sector. M&A activity for North American based target companies in Transportation and Logistics sector for Q4 2019 included 49 closed deals, according to data published by industry data tracker FactSet.

One of the notable lower middle market transactions was announced in December when Franchise Group, Inc. acquired American Freight of Ohio, Inc., a portfolio company of The Jordan Co LP, for US$450 million in cash, subject to certain adjustments. Franchise Group, Inc. is a holding company. American Freight Furniture & Mattress is a warehouse-style furniture store that specializes in furniture obtained through dealer cancellations, factory closeouts, retail chain buyouts, & wholesale liquidations.

There was a significant plunge in cargo volumes in February that could get even worse in the coming months if the coronavirus disease 2019 (COVID-19) worsens and spreads further. The ports of Los Angeles and Long Beach are forecasting a 12 to 15 percent decline in container volume in the first quarter as carriers continue to cancel sailings in the trans-Pacific.

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M&A Quarterly News In The Energy Industry Sector

By Roy Graham | Mar 02, 2020

The report below gives a good overview of the first quarter M&A activity in the Energy Industry Sector. M&A activity for North American based target companies in the Energy sector for Q4 2019 included 75 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions in the sector was announced in November when OMOG JV LLC, a joint venture of Rattler Midstream LP and Oryx Midstream Services LLC, acquired Reliance Gathering LLC, a portfolio company of Metalmark Capital LLC, for US$356 million in cash. Reliance Gathering is a crude oil gathering affiliate of Permian Basin-focused Reliance Energy. Reliance is a private Midland based oil and gas company focused on developing upstream and midstream assets. The Company has over 100,000 net acres in the Permian Basin, including approximately 40,000 net acres in the prolific Northern Midland Basin.

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M&A Quarterly News In The Technology, Media and Telecom Industry Sector

By Dan Vermeire | Feb 28, 2020

The report below gives a good overview of the first quarter M&A activity in the Technology, Media and Telecom Industry Sector. M&A activity for North American based target companies in the Technology, Media and Telecom sector for Q4 2019 included 421 closed deals, according to data published by industry data tracker FactSet.

One of the largest lower middle market transactions closed in November when PTC, Inc. acquired Onshape, Inc., a portfolio company of Commonwealth Capital Ventures, NEA Management Co LLC, AH Capital Management LLC and North Bridge Venture Partners for US$470 million in cash. PTC engages in the development and provision of software-based product management and development solutions. Onshape is a modern CAD system that unites advanced modeling tools and design data management in a secure cloud workspace that is accessible on any device.

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M&A Quarterly News In The Business Services Industry Sector

By Brad Purifoy | Feb 28, 2020

The report below gives a good overview of the first quarter M&A activity in the Business Services Industry Sector. M&A activity for North American based target companies in the Business Services sector for Q4 2019 included 773 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions in the sector was announced in December when NV5 Global, Inc. acquired Quantum Spatial, Inc., a portfolio company of Arlington Capital Partners LLC, for US$318 million in cash. NV5 Global engages in the provision of professional and technical consulting and certification solutions for the public and private sectors. Quantum Spatial is the largest full-service geospatial solutions provider in North America.

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M&A Quarterly News In The Industrials Sector

By Steve Hauser | Feb 21, 2020

The report below gives a good overview of the first quarter M&A activity in the Industrials Sector. M&A activity for North American based target companies in the Industrials sector for Q4 2019 included 125 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions in the sector was announced in December when Arcline Fm Holdings LLC, a portfolio company of Arcline Investment Management acquired Fairbanks Morse Engine from EnPro Industries, Inc. for US$450 million in cash, subject to potential adjustments at closing. Arcline Fm Holdings provides investment services. Fairbanks Morse Engine engages in engine technology and manufacturing. The firm’s products include diesel products, dual fuel products and gas products. The company was founded in 1885 and is headquartered in Beloit, WI.

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M&A Quarterly News In The Print and Packaging Industry Sector

By Jeff Wright | Feb 21, 2020

The report below gives a good overview of the first quarter M&A activity in the Print and Packaging Industry Sector. M&A activity for North American based target companies in the Print and Packaging sector for Q4 2019 included 36 closed deals, according to data published by industry data tracker FactSet

One of the notable middle market transactions in the sector was announced in November when Advanced Barrier Extrusions LLC, a portfolio company of Graham Partners, Inc., acquired Flexographic Packaging Co for an undisclosed amount. Since its founding in 1988, Graham Partners has focused on acquiring and investing in higher growth, middle-market consumer and industrial manufacturing-related companies. Flexographic Packaging provides flexographic printing and custom laminating services. The company was founded in 1995 and is headquartered in Waupun, WI

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