The COVID-19 pandemic plunged the world into uncertainty, changing both consumer lifestyles and business practices. While some changes were temporary, others have proven to be more durable, and one long-lasting change that has directly impacted M&A is the transition to a highly virtual deal environment.
Prior to 2020, M&A due diligence had already become increasingly more expansive. The steady improvement of information technology and the rapid proliferation of data facilitated this trend. Simply put, businesses today have access to significantly more data than businesses of yesterday, providing acquirers with more information to process. The turbulent economic environment that the pandemic left in its wake further increased the due diligence requirements of a typical transaction, adding more risk areas that require diligence, with due diligence also becoming more thorough within each risk area. Meanwhile, the decentralized, remote work environment imposed by the pandemic inhibited another key area of M&A due diligence — face-to-face meetings and facility tours.
Enter the solution: virtual technology, which has been embraced equally by both sellers and acquirers. Today, due diligence is primarily conducted on a virtual basis, with videoconferences supplanting (or supplementing) in-person meetings, virtual facility tours taking the place of site visits, and virtual data rooms and other filesharing applications used to convey information digitally. A highly virtualized due diligence process is improving efficiency, saving time and cost, and satisfying acquirers’ needs to conduct comprehensive due diligence in a turbulent global economy, and we expect that virtual M&A is here to stay.
M&A Market Activity
National deal volume slowed meaningfully in July 2022, as inflation and other economic headwinds have increasingly impacted M&A activity. U.S. M&A deal volume for the seven months ended July 31, 2022 was 11.5 percent lower than the same period in 2021, while deal volume for the month of July 2022 was 31.2 percent lower than July 2021.
The Central Ohio M&A market has exhibited a similar trend as the broader domestic market, as deal volume for the seven months ended July 2022 was 18.6 percent lower than the prior year. Meanwhile, Central Ohio deal volume fell by 24 percent in July 2022 relative to July 2021.
Regardless, July 2022 saw the closing of several noteworthy transactions in Central Ohio — both from strategic and private equity acquirers. Dayton-based software company The Reynolds and Reynolds Company completed two disclosed acquisitions within the month, while Columbus-based Safelite Group, Dublin-based Cardinal Health (NYSE: CAH), and Dayton-based Winsupply all completed strategic acquisitions. Meanwhile, several notable private equity transactions involving Central Ohio businesses were also completed, as Copley Equity Partners (Quincy, Massachusetts) acquired Miamisburg-based LJB Inc., The Riverside Company (Cleveland, Ohio) acquired Hilliard-based Hamrick Fire Systems, LLC in partnership with portfolio company CertaSite, Edgewater Capital Partners (Independence, Ohio) acquired Dayton-based AmeriWater, and Evergreen Services Group, a portfolio company of Alpine Investors (San Francisco, California), acquired Dublin-based Capital City Consulting, LLC (dba EasyIT).
Deal of the Month
On July 20, 2022, CertaSite, a leading commercial fire protection and life safety company — and portfolio company of private equity group The Riverside Company — acquired Hamrick Fire Systems, LLC. The acquisition of Hamrick represents CertaSite’s 18th acquisition and sixth in Ohio. Headquartered in Columbus, Ohio, Hamrick provides services for fire sprinkler systems, fire extinguishers, and suppression systems, as well as emergency lighting solutions. According to Jeff Wyatt, CEO of CertaSite, “We are thrilled to be expanding our unique brand even more so within the Columbus and surrounding areas, and we look forward to continue serving this market.”
Matt Figas is a Vice President with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected].