Throughout 2023, the U.S. M&A landscape has been significantly shaped by a notable rise in distressed M&A transactions. According to bankruptcy filings from the U.S. Courts, the number of Chapter 11 bankruptcies increased 45.5 percent when comparing the first six months of 2023 with the first six months of 2022. This surge in Chapter 11 bankruptcies has created a unique environment ripe for distressed asset acquisitions. The aftermath of the COVID-19 pandemic resulted in higher cost of debt, tighter credit, supply chain disruptions, and atypical financial performance, among various other factors, which has led to a wave of companies seeking bankruptcy protection under Chapter 11. These distressed businesses have become attractive targets for investors and acquirers looking to capitalize on opportunities presented by the distressed assets.

As a result, the increase in distressed M&A activity throughout 2023 has created an opportunistic marketplace where distressed companies are often sold at a discount, presenting strategic investors and private equity firms with the chance to acquire valuable assets, brands and intellectual property at favorable prices. However, many distressed companies engage in an auction process, which further intensifies the competition among prospective buyers. This environment has not only provided opportunities for investors but has also allowed struggling companies to secure a lifeline and continue operations under new ownership, potentially preserving jobs and industry presence. As distressed M&A continues to be a defining feature of the U.S. M&A landscape throughout the remainder of 2023, it underscores the adaptability and resilience of the business community in navigating challenging economic circumstances.

M&A Market Activity

The rollercoaster trend continued for domestic deal volume throughout the month ending September 2023, as month-over-month deal volume declined following month-over-month growth displayed in August 2023. Overall deal volume within the U.S. for the quarter ending September 2023 declined by 11.1 percent when compared to the quarter ending June 2023.

The Northeast Ohio M&A market continued to see strong deal volume for the quarter ending September 2023 with deal volume increasing by 7.1 percent when compared to the quarter ending June 2023. September 2023 saw several noteworthy transactions in the Northeast Ohio region, with CW Industrial Partners, The Timken Company, and Applied Industrial Technologies, all companies with a greater-Cleveland presence, completing acquisitions within the month.

Deal of the Month

CW Industrial Partners’ portfolio company Safe-Way Garage Doors, a manufacturer and distributor of residential, commercial, and industrial overhead garage doors, has completed an acquisition of 1st United Door Technologies, a provider of specialty garage door manufacturing and installation services. This acquisition is a testament to Safe-Way’s commitment to expand its manufacturing and distribution network in the garage door industry as Safe-Way continues to provide its customers with easier access to a broader range of products.

“Our customers have come to know and trust the 1st United name. We chose to partner with Safe-Way, and our customers can rest assured that all the benefits that come with the combined organization will still allow for the 1st United identity and customer-centric culture to continue, which is critical to the combined companies’ future success,” said John Jella, 1st United Door Technologies founder.

Sources: Company websites, Pacer, PitchBook, and S&P Capital IQ

Mike Kostandaras is an Associate with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit or email [email protected].