Welcome to this month’s edition of The Lower Middle Market. Hopefully March Madness hasn’t completed derailed your Thursday like it has mine. Here’s what we have for you in this quick update:

• Smaller LMM funds lead the way in private equity returns

• Home health care’s sluggish 2023

• It may be a good time to go bargain hunting for slow growing VC backed companies

Let’s get into it!

What’s Hot

Private Equity Interest in Semiconductors - Chip production is essentially a duopoly controlled by TSMC and Samsung. These firms enjoy a significant technological and knowledge advantage that would require upwards of trillions of dollars to compete against. However, private equity is seeing opportunities within the wider semiconductor supply chain. Link

Riches in Niches - According to this article in Institutional Investor, the best performing private equity funds in 2023 shared these two attributes: 1) The funds contained under $350 million in assets 2) The funds focused on investing in esoteric industries or businesses Link

Infrastructure Management Services - Fueled by federal funding, infrastructure management services in industries like water and electricity and underground infrastructure are starting to see projects and deal volume pick up

.

What’s Not

Home-based Healthcare Deals - Home Health Care M&A was sluggish in 2023 and was characterized by PE firm’s reluctance to engage in the market. This article discloses why home-based care is in a interesting position when it comes to deal making for 2024. Link

VC-backed Startups - With many slow growing startups winding down and failing to secure additional funding, there seems to be a real value opportunity to acquire these companies that have no other option. Link

VC-backed M&A - Meanwhile, VC-backed M&A is at an all time low. Link

Fundraising

3 Boomerang Capital Closes Flagship Private Equity $375 Million Fund Link

Encore Consumer Capital Closes $258 Million Fund to Target Consumer Products Companies Link

CORE Industrial Partners Announces Closing of Two New Funds Totaling $887 Million Link

Keystone Capital Announces 3rd LMM Focused Fund Link

Ocean Avenue Capital Partners Raises $600 Million Fund V to Focus on LMM Special Situations Link

Gauge Capital Raises $1.4 Billion 4th Fund Link Link

Other stuff

See what NFL legend Steve Young is up to post playing career Link

Caymus Equity Partners hopes to replicate its commercial HVAC, electrical and plumbing growth strategy in environmental services Link

Cross-border M&A looks ready for takeoff in 2024 Link

Uptick in lower-mid-market borrowers struggling to meet covenants Link

Use of equity rollovers continues to rise amid market uncertainty Link

Thanks for reading and have a great end to the week!

Welcome to this month’s edition of The Lower Middle Market. Even though consensus seems to be that the 2024 M&A market will pick up with the expected decrease of interest rates, many participants seem to be in a holding period. However, we do have a handful of tidbits and news to pass along including:

• Investors are suddenly interested in the naval ship ecosystem

• Recent highlights and lowlights of healthcare

• What’s going on with private equity holding periods?

Let’s get into it!

What’s Hot

Naval Ship Ecosystem - An emerging niche within the naval ship ecosystem has emerged due to the $11 billion year over year increase to the Department of Navy’s FY24 request. Expected industries to ride off this tailwind include naval ship maintenance, repair and operations (MRO) and modernization. Link

Divestitures - According to this Pitchbook article, carveouts and divestitures are expected to rise in 2024. With expectations that soft conditions in the LBO market will persist in 2024, PE sponsors will continue to rely on tools that optimize their existing assets rather than seek out new platform investments. Link

High Growth Pharma Companies - Clinical trial companies have been a bright spot with EBITDA multiples as high as 20x in recent deals. Other adjacent areas that are showing signs of life with attractive multiples include clinical research organizations (CROs), contract development and manufacturing organizations (CDMOs), and healthcare research and data companies Link

What’s Not

PE-backed Hospitals - Speaking of healthcare, a recent study by Harvard Medical School and University of Chicago researchers shows hospital patients are more likely to fall or acquire infections inside of private equity-owned facilities than in peer facilities Link

Holding Periods - The median holding period for PE-backed portfolio companies is now 5.6 years, the highest value since Private Equity Info began tracking it in 2000. Link

Fundraising

Shorehill Capital Raises $260 Million to Focus on Industrial Companies Link

Tower Arch Capital Raises $750 Million Fund III Link

Taurus Private Markets Closes Second Lower Mid Market Fund Link

Falfurrias Raises $400 Million for Growth Focused Software and Business Services Companies Link

Turnspire Capital Partners Closes $275 Million Fund for North American LMM Industrial and Consumer Businesses Link

Clearhaven Partners Raises Sophomore Fund for LMM Software and Tech Companies Link

Falfurrias Growth Partners Raises $400 Million For Lower Middle-Market PE Fund Link

Cleveland-based Edgewater Capital Closes 5th Fund Link

NewSpring Raises $180 Million for Healthcare Fund Link

Seven Hills Closes $125 Million Inaugural Fund Link

Forward Consumer Partners Raises $425 Million Debut Fund in Search of Branded Consumer Companies Link

Leavitt Equity Raises 3rd Healthcare Focused Fund Link

Bertram Capital Raises $1.5 Billion for its Fifth Fund Link

Other stuff

The Way Companies Borrow Money is Changing Forever Link

Permanent Equity’s Annual Letter Link

An Interview with Thayer Street Partners’ Josh Koplewicz Link

Thanks for reading and have a great end to the week!

• Medspas drawing interest

• Bitotech earnouts low success rate

• Could private equity could create systemic risk for the U.S. economy?

What’s Hot

Medspas - According to this Pitchbook report, “Numerous sponsors are looking for entry into medspa, with its consumer demand tailwinds, cash-pay business model, and small clinic footprints. A category that lends itself to de novo plays, medspa feels very of the moment.”

Continuation Funds - Although Bain & Company recently reported that private equity investors are increasingly saying no to continuation funds, opting instead for cash, a few firms have bucked the trend. BV Investment Partners announced the closing of a single-asset continuation fund transaction for Right Networks. ABS Capital closed its first continuation fund. Meanwhile, Kinderhook Industries announced a $1.3 billion continuation fund in partnership with AlpInvest.

Systematic Risk - Federal regulators continue to take aim at private equity and hedge funds with an ongoing debate over whether private equity creates systematic risk for the U.S. economy. Link

What’s Not

The Traditional LBO - With the climbing cost of capital, private equity firms are increasingly reliant on the organic growth of their portfolio companies. Link

Biotech Earnouts - A recent study found only 22 percent of biotech deals met their earnout milestone to payout. This article suggests that earnouts from those tied to research advances such as successful clinical trials, have a much better chance of hitting than those tied to commercial goals. Link

This (Mainly Incorrect) Take From The Atlantic on the Private Equity Industry - Outcomes are all about incentives. Unfortunately, this author failed to mention the many negative outcomes public companies create due to equally - if not worse - incentives. Link

Fundraising

Kelso & Company Closes Middle Market Fund XI at $3.25 Billion Link

NexPhase Capital Raises Fund V to Focus on LMM Healthcare, Software, and Consumer Industry Verticals Link

Graycliffe Partners Holds Single Closing for $600 Million Buyout Fund Link

Gridiron Capital Closes Fifth Fund Above Target at $2.1 Billion Link

Incline Closes Fund VI with More than $1.9 Billion Link

Pfingsten Closes $435 Million Fund VI Link

Granite Creek Capital Partners Closes LMM Flexible Capital Fund at $300 Million Link

Great Range Capital Closes $250 Million Fund to Focus on Midwestern LMM Companies Link

Rubicon Technology Partners Raises $1.7 Billion for LMM Software Companies Link

Brynwood Partners Closes its Ninth Fund at $750 Million Link

Saothair Closes Inaugural Fund at $125 Million for Manufacturing Companies Link

Trivest Closes its Largest Fund Ever Link

Other stuff

Align Capital Partners Launches New Strategy Targeting Independent Sponsors Link

Supporting Middle Market Manufacturing – A Conversation with Torque Capital Group Link

A Strategic Partnership Aims to Invest in Lower Middle Market Companies Link

Thanks for reading and have a great end to the weekend!

Here’s what we have for you today:

• Success in the lower end of the M&A market

• A crackdown on roll-up strategies

• Industry to watch: vegetation management

What’s Hot

Growth Equity - According to Pitchbook, growth equity deal flow defies a slowdown in PE dealmaking. Link

Smaller/Niche Private Equity Funds - Private equity strategies that have less than $350 million in assets, and that focus on investing in esoteric industries or businesses, continue to meaningfully outperform their larger peers, according to data collected by Mantra Investment Partners. Link

M&A Activity on Founder-Owned Companies - The increase of deals in the lower middle market is due in part to a slowdown since the onset of the pandemic. Everyone is now playing catch-up. Founder-owned companies are clustered in industries, such as those that are consumer-facing, according to PitchBook. These sectors were severely impacted by the pandemic. Link

Unmanaged Vegetation Surrounding Energy Utility - Utilities investors are charging up for vegetation management. The sector is fragmented, innovative, and facing surging demand. Dealmakers have an opportunity to invest in keeping the lights on and preventing wildfires. Link

What’s Not

Private Equity Fund Regulation - Private equity got almost everything it wanted when securities regulators watered down their new fund oversight rules. Now it wants the rest. Link

Small Business Lending - As an aftershock of the SVB collapse, regional banks are reviewing their small business lending. According to Jeffrey Stevenson, managing partner at VSS Capital Partners, “Regional banks have pulled back and, in some cases, have put a hold on new customers or, at the very least, have lowered their leverage levels and tightened their covenants,” he says. “It’s a big dynamic in the marketplace right now because small companies have [traditionally] been financed through the regional banking system.” Link

Roll-up Strategies - The FTC recently filed a lawsuit against PE-backed Anesthesia Partners in which it is alleged that private equity firm. Welsh, Carson, Anderson & Stowe attempted to monopolize the market in Texas and drive up prices for anesthesia through its roll-up strategy. Link

Fundraising

Gainline Capital Partners Raises $400 Million Fund II for LMM Businesses Link

CenterGate Capital Announces CenterGate Capital Fund II Closing Link

Eagle Merchant Partners Closes Fund I with Focus on Franchise, Consumer and Industrial Companies Link

Comvest Partners Announces Final Close of Sixth Flagship Credit Fund at $2 Billion Link

Valesco Industries Announces Over Subscription of Fund III at $434 Million to Invest in Industrial, Distribution, and Bussiness Services Companies Link

Sheridan Capital Partners Closes Fund III at $575 Million of Capital Link

St. Cloud Capital Closes $236 Million LMM Debt and Growth Capital Fund Link

Angeles Equity Partners Closes Fund II at $540 Million Link

Access Holdings Raises $805 Million for Build and Buy Mid-Market Investments in Essential Service Industries Link

FVLCRUM Partners Closes Fund at Over $302 Million to Address Racial Wealth Gap Link

Interlock Equity Closes Inaugural Fund at $390 Milion Link

Other stuff

Firmex’s Q3 Deal Flow Bulletin Link

Midmarket Businesses Rethink Their Approach to Growth Link

Climate Change Alters the Real Estate Renovation M&A Landscape Link

Thanks for reading and have a great week!

Here’s what we have for you today:

• What’s hot/what’s not in lower and middle market private equity

• Recent fundraising news

• Why private equity is watching documentaries

What’s Hot

Continuation Funds - Continuation funds are a type of investment vehicle that allows private equity firms to keep investing in companies that they have already invested in. In light of more challenging market conditions, continuation funds offer private equity groups a way to extend their investment horizon, avoid selling companies at a discount, and release investors from commitments if they are interested in moving on. According to Middle Market Growth, they’re here to stay. Link

Carried Interest - Any changes to carried interest taxation seems to be off the table for the time being. Link

Software Industry M&A - Software Equity Group recently released their 2Q23 Quarterly SaaS Report, and software (SaaS, on-premise license models, and internet companies) M&A deal volume continues to rebound from the bottom of 4Q22. 2023 is expected to finish just ahead of 2021’s total, which would make it a fantastic year on a historical volume basis.

What’s Not

Enterprise Software Exits - Sales of PE-owned enterprise software companies got tangled up at the start of 2023, hitting the lowest deal level since Q2 2020. Link

Upper Middle Market Deals - EisnerAmper recently released a private equity investing outlook. The report mentioned that the lower middle market is the current area of the market with the most opportunities. Why? For one, this end of the market provides 10x the opportunities than the upper end. Although high inflation and rising interest rates are often cited as challenges in the M&A landscape, investors in the middle and lower ends of the market are not finding these challenges to be as limiting as those transacting at higher valuations. Link

Middle Market Firms Servicing Debt - PitchBook data shows at least 18 PE-backed companies filed for bankruptcy in the US during the first five months of 2023—the highest number since 2020. Link

Fundraising

Godspeed Closes Oversubscribed $250m Fund II Link

Kinzie Capital Closes First Institutional Fund at $150M in Commitments Link

Nexa Equity Closes Inaugural $180 Million Fund to Scale LMM Fintech and Software Companies Link

Capital Alignment Partners Completes 4th Fund for Healthcare, Manufacturing, and Light Industrial Services Companies Link

Hidden River Announces $245 Million Inaugural Fund Link

Stone-Goff Partners Closes Fund IV at $175 Million Link

North Branch Capital Raises 2nd Fund at $213 Million Link

Varsity Healthcare Partners Closes Fund IV at $700 Million Link

MPE Partners Closes Fund IV at $633 Million Link

Audax Private Equity Raises $774 Million for the Firm’s Debut Lower Middle Market Strategy Link

St. Cloud Capital Announces 3rd SBIC Fund Link

The Riverside Company Closes Value Fund I at Target of $350 Million Link

May River Capital Closes 3rd Fund to Focus on Industrial Companies Link

ASH Investment Partners Closes $150 Million Fund Targeting Digital Services Link

Other stuff

Why Private Equity is Watching Documentaries Link

Masters of Their Own Realities Link

Interview with the Founder of Atar Capital Link

Thanks for reading and have a great week!

Happy Sunday! We’re writing this on a lazy Sunday or at least lazier than last Sunday’s combo Easter celebration/Master’s final. Speaking of which, if you didn’t have a chance to read through this thread on Augusta National, you should. It’s fascinating:

https://twitter.com/JoePompliano/status/1644365793293918208?s=20

Moving on, here’s what we have for you today:

• LMM market update

• QoE dragging deals down

• Insights on the recent Code Advisors acquisition by The Raine Group

Market Update

Over the last year and some change, the M&A market has been in flux. 2022 marked a shift from mega deals to smaller deals. As the cost of capital shot through the roof, many investors experienced a flight to safety. Add-on acquisitions became a focus. Raising funds focused on smaller companies became a logical next step. The recent regional bank scare sent shockwaves throughout financial markets. And the case for an extended recession looks to be back on the table as investors and lenders proceed with caution.

So where do we go from here? Let’s take a look at some recent market commentary and thought leadership from top M&A professionals in the market:

Sell-side m&a advisory firm, Northern Edge Advisors predicts a gradual recovery in 2023 as excess liquidity drives acquisition growth. Key themes from their insights include:

• Borrowing is considerably more expensive due to higher interest rates, with tightening expected to ease by mid-2023

• Private equity firms are sitting on unprecedented dry powder, which they will seek to use on attractive opportunities

• The difficult operating environment will drive an increase in companies jettisoning non-core assets

• Some deals will be voluntary while other companies will be forced to sell assets, creating opportunities for buyers to expand product lines, services, or supply chains at a reduced rate

• Buyers increasingly focus on smaller, more affordable deals, versus large-scale acquisitions, due to economic uncertainty

M&A Firm, Generational Equity, expects lower middle market deals to thrive, against the backdrop of a rough market for larger middle market deals.

Emily Rouleau of Bloomberg has a slightly different take and thinks all areas in the M&A market will take longer to bounce back due to economic uncertainties. Of note, small deals (EV < $100mm) recently experienced their worst quarter (by deal volume) in at least five years.

John Ferrara, Founder of Capstone Partners, sees the second half of the year and into 2024 as providing breathing room in capital markets. He sees a robust level of pent-up demand waiting to hit the market and creating a healthy pipeline of M&A transaction activity.

Whenever attempting to project the future we’re always reminded of the famous Buffett quote “forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.” With that being said, at minimum, it’s useful to understand what the consensus thinking is along with potential base case scenarios.

QoE Dragging Deals Down

In the current high-cost-of-capital environment, due diligence takes an even higher priority for buyers in examining targets. We came across this article by Mark Borkowski of Mercantile Mergers & Acquisitions on the subject of Quality of Earnings. In recent years, Quality of Earnings (QoE) reports have increasingly played a pivotal role during the due diligence process. Traditionally, buyers have paid for QoE reports, but more and more sellers are paying for the reports to be prepared before a Letter of Intent has been signed. This seems like a healthy and important trend for targets in a) avoiding a potential deal killer and b) helping the seller better understand potential red flags before going to market. As a result, targets should be prepared, with financials and operations ready to face greater scrutiny.

On the topic of due diligence, here’s a recent buy-side perspective on the cost of QoE for lower middle market deals:

Fundraising

Deerpath Capital Closes Sixth Senior Debt Flagship Fund with $1.5 Billion in Equity Commitments Link

Bow River Capital Closes $600+ Million Software Growth Equity Fund Link

DW Healthcare Partners Raises Founders Fund with $210 Million of Commitments Link

Accel-KKR Raises $5.3 Billion for Two Lower Mid-Market Funds Link

Other stuff

The Relationship lesson in Raine Group’s deal for Code Advisors Link

Pitchbook’s 2022 US PE Middle Market Report Link

Private Equity Dips Down Link

Explore National Small Business Week Link

Thanks for reading and have a great end to your weekend!

We’re coming to you live from sunny Southern California where we’re attempting to be the only financial news update this week to not mention the words “bank run” (strike one).

Here’s what we have for you today:

• The retail revolution in private equity

• Fundraising update

• Valuations cooled in Q4

Private Equity’s New Era

Many successful consumer companies were built around the framework of democratizing what the rich do for the masses. Uber did it for black car service, Stitchfix for custom wardrobe styling, and Betterment/Wealthfront for robo wealth/investment advisory. Could the same trend soon be hitting private equity?

Blackstone is taking charge of attracting less affluent investors with new private equity products and services. Although their services don’t exactly target mom-and-pop investors, they’re targeting what the Institutional Investor refers to as the “barely rich.” These are investors with $1 million to $5 million in investable assets, who have historically low allocations to alternative investments. According to Joan Solotar, Blackstone’s head of private wealth solutions, at stake is an $80 trillion market of individual investors. “And today less than 5 percent is invested in alternative products.” On the services side, Blackstone also launched Blackstone University to help educate and introduce less sophisticated investors to the benefits of allocating investments to alternatives.

Another potential factor affecting the “retail revolution” in private equity, is the changing qualifications for becoming an accredited investor. Although it’s easier than most think to become “accredited”, historically it was based on income and net worth requirements. In 2020, the SEC amended its requirements to include a third option to meet the definition requirements by gaining a Series 7, 65, or 82 license. Recently, a new bill was introduced that would make becoming an accredited investor even easier. If it passes, the SEC will create a new exam anyone can take specifically to become an accredited investor.

Big firms like Blackstone are targeting the barely rich to become limited partners, by investing in their funds. That will accelerate the growth of perpetual capital and fee-related earnings at these firms. However, another trend to watch in lower middle market private equity is the influx of individual buyers participating on the deal level. This group includes search funds, independent sponsors, and accredited individual investors who see opportunities to participate in deals that were once confined to more sophisticated investors. Although they tend to participate in the lower end of the middle market, just under private equity thresholds, the lines are beginning to blur.

We’re curious to watch where this industry goes as more retail investors look to participate both indirectly and directly in private equity investments. The downstream effects could be wide-ranging. Have any thoughts on where this goes and who’s set to benefit? Please respond to this email by telling us what you think.

Fundraising

Tritium Partners secured $684 million for Fund III Link

Gemspring Capital announced two funds with $2.1 billion in aggregate commitments Link

Rainier Partners raised $300 million for lower-mid market services businesses Link

The Riverside Company announced Riverside Micro-Cap Fund VI Link

Other stuff

This multifamily office is enlisting the expertise of entrepreneur clients for a new PE platform Link

Valuations cooled in Q4 suggesting flight to quality is oversimplified Link

World’s richest woman, L’Oreal billionaire, beefs up investment firm Link

Venus Williams joins lower mid market PE firm Topspin Link

Have a great rest of the week! We’ll leave you with this Tweet…

We’ve been taking notes for this edition in our Karst notebooks. And let me tell you they are the BEST. And let me also tell you, NO, we didn’t get paid to say this. What makes them so great? Glad you asked. The paper is made of stone and is incredibly smooth to write on. They’re also waterproof, so if you spill your water or coffee on any pages, no worries! The notebooks are also more sustainable from a carbon footprint perspective if you’re into that sort of thing. The only downside is they’re slightly more (or much more) expensive than our second favorite notebook, the yellow-lined legal pad.

Moving on, here’s what we got for you today:

• Secondaries are sizzling

• 2022 software M&A review

• The pandemic boosted the case for PE

PE secondaries

With the Super Bowl kicking off a week from today, football is on the mind. But we aren’t talking about those secondaries. Private equity secondaries are a hot topic right now. This is on news that Blackstone raised a record-breaking $25 billion in its latest secondaries strategy funds, dedicated to providing LPs and GPs liquidity solutions on the secondary market.

But why?: At a high level, secondaries in private equity refer to a transaction in which an investor is buying an existing interest or asset from primary private equity fund investors. This can be in the form of a sale of funds interest or through a sale of direct portfolio investments. The former seems to be driving much of the latest activity. Secondary deal volume came in at $108 billion in 2022. This was an 18% decline from 2021 but was still the second highest ever. 52% of the deal volume was LP portfolios, representing a larger market share than GP-led deals for the first time since 2019.

Given the increasingly difficult exit environment, and the illiquidity nature of private equity investments, LPs will continue looking to liquidate on the secondary market. This allows GPs to retain control of the asset until the market environment turns more favorable. Don’t expect this to dissipate any time soon. In fact, Blackstone is betting that it won’t.

Software taking over the world

Software-focused M&A advisory firm, Software Equity Group, recently released its 2023 SaaS Annual Report. With over 30 years of sell-side M&A experience, the firm advises bootsrapped and financially backed entrepreneurs in selling their B2B software businesses. With a good vantage point on SaaS M&A, the firm recently announced it’s 7th consecutive record breaking year for deal performance.

Here are some notable highlights from the report:

• SaaS M&A deal volume remains elevated, reaching 2,157 deals in 2022 and growing 21% over 2021

• Median EV/Revenue multiple for SaaS deals jumped to 5.6x in 4Q22

• Private equity accounted for 59.5% of transactions, a record for annual activity, and accounted for some of the highest multiples in 2022 - lots of dry powder on sidelines

Fundraising

Seaside Equity Partners raised $325 million for Fund II Link

Shoreline Equity Partners raised $450 million for Fund II Link

Kingswood Capital Management raised $620 million Fund II Link

Gemspring Capital announces its third buyout fund Link

Other stuff

The Pandemic Boosted the Case for PE Link

Winners of the inaugural Independent Sponsor awards Link

Search fund investor, WSC & Company, launches WSC Heritage to invest in middle-market businesses Link

Have a great end to your weekend! We’ll leave you with this Tweet..

Temperature Check

Coller Capital recently shared its 37th Coller Capital Global Private Equity Barometer. While many of the investors polled still find the asset class attractive, it’s clear there has been a drop in bullishness since the last poll, 6 months ago. Some of the highlights include:

• PE and private credit are viewed as more attractive by LPs than public markets in volatile times

• The macroeconomic environment and inflation are LP’s top concerns over private equity returns for the next 2-3 years

• More LPs are investing in PE energy assets than four years ago, in both renewables and hydrocarbons

• One-third of LPs plan to increase allocation to alternatives over next year vs. one-half, 6 months ago; Fewer LPs are planning increases in allocations to private equity

• The number of LPs forecasting that their private equity portfolios will achieve

  returns greater than 16% is at the highest level since the winter of 2011-2012

• Gaining more influence with a GP is seen as a major advantage:

  

• Only 5% of LPs say they are likely to change the balance of new private market funds in response to opportunities created by the Biden Administration’s recent Inflation Reduction Act

Click here to access the full report.

Add-Ons Popularity on the Rise

Over the last year, add-on investments have been adding up. According to Pitchbook, add-on activity accounted for 72% of all PE middle-market buyouts in Q3. Most platform activity has slowed down tremendously due to the macroeconomic environment: geopolitical issues, inflation, rising interest rates, supply chain instability, and other issues. In other words, investors are becoming risk averse leading to smaller investments. As the frothy market conditions of 2021 give way to the new reality of current market conditions, conservative strategies will continue to gain steam. As a result, additional reliance on value creation will play a pivotal role and should see the increase in add-on activity continue in 2023. Particularly, as firms wait out a cooler credit and deal-making environment.

Related Reading:

• Private Equity Turns to Small Ad-ons for Profits

• PitchBook Q3 Middle Market Report

• Smaller Deals Gain Favor as Private Equity Pros Look Toward 2023

Most Active Investors

We tracked over 170 lower and middle market transactions in 4Q22. The most active firms were Incline Equity Partners and The Riverside Company. Both firms were busy and participated in five transactions each.

Incline Equity Partners:

• Acquired Icreon, a digital transformation services company (New Platform)

• Acquired Intech Equipmet and Supply, a spray polyurethane foam company (Add-on to its Specialty Products and Insulation Platform)

• Acquired iWave, a data-driven insights company for non-profits (New Platform)

• Acquired Norkan Industrial Supplies, an asbetors & mold abatement supplies provider (Add-on to its Jon-Don Platform)

• Acquired CRT Industrial Equipment, an industrial cleaning equipment provider (Add-on to its Jon-Don Platform)

The Riverside Company:

• Acquired Oberon Company, an Arc Flash PPE product manufacturer (Add-on to its SureWerx Platform)

• Acquired First Advantage Consulting Firm, a consulting firm specializing in Affirmative Ation Plans (Add-on to its OutSolve Platform)

• Acquired Canuti Tradizione Italiana, a frozen pasta distributor (Add-on to its Il Pastaio di Brescia Platform)

• Acquired BioDue, a dietary supplements and medical devices company (New Platform)

• Acquired Applied Educational Systems, an online education service provider (Add-on to its iCEV Platform)

Top Add-On Activity

With add-on activity generating a lot of buzz on the quarter, a couple of platforms led the way when it came to M&A volume in the quarter.

CPS Capital-backed Royal House Partners was busy buying businesses in the HVAC, plumbing, and electrical services space. The firm added on four home services businesses during the quarter.

NMS Capital’s U.S. Foot & Ankle Specialists platform acquired four podiatry/foot & ankle centers.

Fundraising

Resurgens Technology Partners raised $500 million for software-focused Fund II Link

Union Capital Associates raised $309 million for 3rd fund Link

LongueVue Capital closed LVC IV, a $360 million private investment fund Link

Clearview Capital completed fundraising for Equity Fund V Link

Kuwait’s state-backed Wafra raised $1.5 billion for lower-mid market companies Link

AAVIN raised $63 million yaking investable capital to $189 million for small businesses Link

ACP raised $620 million Fund III Link

Kindhook Industries closes Fund 7 at $1.85 billion Link

American Pacific Group announced Fund II Link

Thoma Bravo raises $6.2 billion Explore Fund II for lower middle market investments Link

VSS Capital Partners closes VSS SC Fund IV to invest in healthcare, education, and business services companies Link

Sentinel Capital Partners closes $5.2 billion Fund VII Link

Manhattan West raises inaugural fund to focus on LMM companies Link

Other Stuff

CAPX: The new digital platform aimed at eliminating the inefficiencies in approaching middle market debt capital Link

With a recession looming, PE angles for opportunities in 2023 Link

Revisiting Search Funds in the Lower-Mid Market

We recently came across an article on search funds from Timothy Goddard of Corum Group. Timothy provides a good sell-side perspective on both the benefits and downsides of dealing with search funds.

The Good:

• Lots of capital in the market with approximately $6.9B of equity value that was generated through search funds since 1984

• Search funds tend to be fast responders and more flexible than other buyer types

• For founders and CEOs concerned with legacy and the future of their business a search fund can be a great match

• The key metric in the success of a search fund is a fit between the company and the searcher

The Bad:

• The proliferation of search funds has added to the signal-to-noise ratio when it comes to managing the M&A process

• They can lack the industry expertise, ready capital, and clean structure to make a deal feasible

• You tend to have to sell the company twice - first, the searcher, then their investors

The Ugly:

• A longer and more complex due diligence process with the search fund and their loan partners needing time to diligence the agreement and the company

• Search funds only have to do one deal meaning there are fewer incentives for bad behavior versus a private equity group that can’t afford a bad reputation

The article closes by mentioning that on net, it is worth including search funds in the M&A process. A search fund that matches the owner’s vision for their company can be a great fit, especially if they also bring sector experience, technical expertise and ready access to capital. On the ready access to capital part, we’d recommend looking into the difference between a self-funded search fund and a traditional search fund, as they are often conflated.

You can read the full article by clicking here.

Compounding Capital with Will Thorndike

Will Thorndike, founder of Housatonic Partners and author of The Outsiders was recently on the Invest Like the Best podcast with Patrick O-Shaughnessy. It’s a great listen if you’re interested in the intersection of search funds, long-term holding periods, and lower middle market private equity opportunities.

Some of the highlights worth sharing:

• Over the last 10 years, software has become the single most popular industry for search funds

• There’s disproportionate power in truly low churn businesses (defined as <2% customer churn)

• Search for businesses with high returns on tangible capital

  • Defined as EBITA(1-tax rate)/(Net Working Capital +PP&E); looking for 20% or better

• Retaining the ability to do small acquisitions really well instead of solely focusing on larger deals turns out to be a common thread across really long-term serial acquirers

• The Rule of 10 for serial acquirers

  • Defined as Gross (Logo) Churn + EV/EBITDA; The lower the better and ideally under 10

You can find out more about Will by checking out his new podcast 50x or by visiting Compounding Labs, his new firm.

Transactions Happened

LLR Partners was the most active investor in the quarter. The firm participated in 12 investments ranging from its medical practice platforms to software and financial services. Investments included:

Medical Practices 🩺

• WellNow Urgent Care scooped up Physicians Immediate Care Link

• Eye Health America acquired Bradenton Eye Clinic and West Georgia Eye Care Center Link

Hospitals & Health Care 🏥

• Revecore acquired revenue cycle management companies Kemberton and Cura Link

Financial Services 💰

• Celero Commerce acquired Community Bankers Merchant Services Link

• ParkHub acquired Fuzse Link

Software 💻

• DaySmart acquired TeamUp Link

• Edlio added on SchoolInfoApp Link

• Growth investment in AI-driven transportation management platform, PCS Link

Construction isn’t the first industry that comes to mind when thinking about lower middle market private equity as it’s often driven by cyclicality and high cap-ex requirements. However, construction-related deals led the way in our 3Q22 deal tracker.

Construction-related deals for the quarter include:

• Huron Capital’s Pueblo Mechanical acquired ProCraft Mechanical Link

• Copley Equity Partners invested in Roof Depot Link

• Mill Point Capital acquired Construction Resources Link

• Gladstone invested in Viva Railings Link

• Northstar and Soundcore invested in ACI Asphalt & Concrete Link

• O2 Investment Partners-backed Capital Construction added on Linear Roofing & General Contractors Link

• Compass Group Equity Partners invested in Florida Energy, Water, & Air Link

• Southfield-backed Milrose acquired Masterplan Link

• Argyle and Celina Capital Corp acquired TRS Components Link

Fundraising

Peterson Search Partners Raised $100 Million for Fund II Link

Twin Bridge Capital Partners Closed 5th Fund at $880 Million Link

Shore Capital Partners Closes Over $290 Million for Food & Beverage Fund II Link

Crossplane Capital Closed Fund II to Target LMM Industrial Companies Link

Argosy Private Equity Closed 6th Fund at $422 Million Link

Resolute Capital Partners Announced Close of Fifth Fund at $405 Million Link

McNally Capital Raised $150 Million for Fund II Link

Kayne Capital Closed $600 Million in Latest Growth Equity Fund Link

Bow River Capital Raised $590 Million for Fund III Link

Turning Rock Partners Closed Fund II Link

RiverGlade Capital Raised $453 Million Fund II Link

HCAP Partners Announced Final Close of New $353 Million SBIC Fund Link

Other Stuff

Inside Eastman Kodak’s Private Equity Program, Where Lower Middle Markets Reign Supreme Link

Franklin Foster on Essex Bay Capital’s Launch Link

Emerging Manager Spotlight: Jack Waterstreet of Sky Island Capital Link

Emotions Run High In M&A, But Effective Communication Keeps Deals On Track Link

When To Leave Leadership Behind Link

Sell-Side M&A Reaches New Heights as Buyers Remain Picky Link

Pitchbook’s 2Q22 Middle Market Report Link

Private Equity Q&A with Altera Private Equity Link

The Intersection of Boring and Complex as an Investment Guide:

Cultural Literacy and Capital Markets in the Middle Market

Before we get to recent lower middle market activity, we want to share a couple of Harvard Business Review articles that we came across.

The first is an article from 2021 titled “Bridging the Gap Between Capital Providers and Midsize Companies”. The article’s author, Richard Price of PQ Capital Suite, points out that when it comes to capital markets the lower and middle market is vastly underserved due to a confluence of dynamics. For one, smaller companies tend to have less financially sophisticated owners and C-suite executives who are preoccupied with operating demands. There’s also a lack of M&A experience in lower mid-market business leaders leaving them in the dark when it comes to finding the right buyer or target during an M&A process.

On the banking side, loans at this end of the market tend be more expensive from an interest rate and covenant perspective when compared to larger companies. Additionally, there’s apprehension from word getting out that a company is shopping around to other local banks leaving them with the possibility of zero funding options. From an M&A perspective, only one in five sellers uses an investment banker. Richard explains this is partly due to sell-side advisors who charger higher success fees to compensate for participating in smaller deals. There’s also a lack of perceived value add from these advisors, as only one in ten deals get done.

As a result of these inefficiencies, many companies in the market default to the status quo of sedentariness when it comes to capital transactions. Technology and innovation is one way to bridge the gap between capital provider and small to mid-sized companies. There’s a number of companies trying to help. We at PrivSource are happy to play our role.

You can read the full article here.

The second article from HBR is titled “To Make Deals in the Middle Market, Private Equity Needs Cultural Literacy”. The article, co-authored by Nancy Langer and Sharon Heaton of sbLiftOff, discusses how cultural literacy is one of the most critical ingredients in achieving successful results in middle market M&A.

Nancy and Sharon highlight that there are two main differences in the cultural world between middle market business owners and private equity professionals. The first is differences in education, where many business owners don’t have advanced degrees or even college degrees while PE professionals tend to have MBAs from a concentrated pool of top-tier universities. The second main difference is a lack of M&A experience on the part of business owners.

What can both sides due to help bridge the gap? PE professionals should focus on speaking the language of business owners by being relatable. It’s also crucial to keep in mind that financial considerations are only part of the many factors that owners consider when determining who to sell to. Often times company and employee legacy are extremely important. For business owners, engaging with a sell-side advisor can help professionalize the process and avoid time-consuming and unstable negotiating, which is appreciated by private equity firms.

You can read the full article here.

Recent Lower Middle Market Transactions

The following is only a sample of recent transaction data. You can find the full list by clicking here.

Automotive related deal making flourished in recent months:

Huron Capital’s Addictive Desert Designs Acquired Rago Fabrication Link

MiddleGround Capital’s Race Winning Brands Acquired TPT Solutions Link

Skylark Private Equity Partners-backed USA Automotive Partners Acquired Caldwell Automotive Partners Link

An Investor Gruop Led by Brookside Capital Partners, Tecum Capital, Patriot Capital Invested in TopDown Link

MPE Partners Announced the Sale of dlhBOWLES to ABC Technologies Link

Everside Capital Partners and SJ Partners Invested in CentralBDC Link

BRS & Co.’s Tolemar Platform Completed Three Ad-On’s in the UTV, ATV and Motorcycle Markets Link

While, healthcare deals continued to pick up steam:

Argosy Participated in the Recap of Specialty Care Management Link

VSS Capital Partners Sold Caravan Health to Signify Health Link

ICV Partners Expanded it’s Urgent Care Platform Link

Atlantic Street Capital Expanded its Orthopedic Platform Link

Blue Sea Capital Invested in Specialty Smile Partners Link

Enhanced Healthcare Partners Invested in Vytalize Health Link

HCAP Partners Invested in Nurse Staffing Company, FleetNurse Link

Varsity Healthcare Partners-backed Emergency Care Partners Expands to Lake Havasu with Acquisition of Arizona Emergency Medicine Specialists Link

Bow River Capital Participates in Recap of Home Services Company, Amazing Care Link

Recent Lower Middle Market Fundraising

Freeport Financial Closes 5th Direct Lower Mid-Market Lending Fund at $1.5 Billion Link

Havencrest Closes on its Second Fund Focused on LMM Healthcare Companies Link

Rallyday Partners Closes $205 Million Sophomore Fund Link

Coral Tree Partners Closes Inaugural Fund at $470 Million Link

Vance Street Capital Closes $532.5 Million Third Fund Link

Great Point Partners Closes Fourth Health Care Growth Buyout Fund at $506 Million Link

Compass Group Equity Partners Closes $255 Million Fund Link

Plexus Capital Raises More Than $500 Million for Fifth Fund Link

NextGen Growth Partners Closes Second Fund Above $100 Million Link

NovaQuest Private Equity Closes Fund II at $500 Million Link

Black Bay Energy Closes Second Fund at $210 Million Link

Benford Capital Partners Closes Oversubscribed Fund II at $200 Million Link

Trivest Closes Trivest Fund VII and Trivest Discovery Fund II Link

Tyree & D'Angelo Partners Closes Fund III at $350 Million Link

Other Stuff

Four Steps to Building a Better Board at Lower Middle-Market Companies Link

Nexa Equity Founder on the Gap at the Lower End of the Market for New Investors to Enter Link

Small Market Deal of the Year: Argosy Capital Partners and Paragon Link

Q1 US PE Breakdown Link

Before we get to our 1Q22 LMM highlights, we included an overview of KPI analysis for M&A and private equity professionals. The digitization of KPIs has an effect not only on the reporting of portcos, but also on the due diligence process. Rob Hong from Sapling Financial Consultants highlights the advantages of moving from Excel-based KPI reporting to software-based tools.

Additionally, Pitchbook released its 2021 Annual US PE Middle Market Report. TLDR: Middle market fundraising showed slower signs of recovery than the rest of the PE fundraising landscape. Ongoing inflation and higher input prices are stifling company earnings while valuation multiples are falling with rising inflation rate pressures.

Replacing Excel for KPI Analysis?

As private equity firms are increasingly focused on adding value to portfolio companies, key performance indicators (“KPIs”) have been growing in importance. KPIs are quantitative measurements that allow users to continually assess a company’s performance; examples include Revenue per Client, Client Retention Rate, Customer Acquisition Cost, etc. These KPIs are often leading indicators – so rising Customer Acquisition Costs may foreshadow falling revenues, and so on.  Buy-side M&A lawyers can guide their clients to successful transactions by understanding the impacts of KPI reporting systems and what is required to transition from limited or no reporting to enhanced KPI reporting.  Understanding the advantages of enhanced KPI reporting can assist with valuations and factoring in opportunities for value creation to justify acquisitions.  Additionally, knowing what data is necessary to implement enhanced KPI reporting systems (post-close) can benefit the due diligence process as there is a better understanding of crucial data available to support the applicable KPIs of the company in question.

Rob Hong, Co-Founder and CEO of Sapling Financial Consultants, a Toronto-based financial modeling and data analytics consulting firm, has been working with PE firms for several years to enhance KPI reporting for their portcos. Sapling started with Microsoft Excel-based dashboarding in 2017 before migrating to newer tools since.

Excel, of course, has many strengths, and is at the heart of investment bankers’ training and day-in, day-out. The ubiquitous piece of software is used to model LBO deals, compile comparables, reconcile financials, and just about everything else. It should be of little surprise, then, that private equity Associates bring their passion for Excel to their new PE employers, where they then deploy the software to portfolio companies, building internal budget models and developing KPI dashboards.

The issue is that Excel is a poor tool, and possibly a terrible tool, for KPI dashboarding. For one thing, KPIs are usually based on large data sets that drastically exceed Excel’s capabilities (> 1 million rows). This means that any Excel-based analysis has to be focused on a small subset. Moreover, often reports have to be pulled from several systems through a highly manual process. This leads to hours of unnecessary work and possibly significant divergences between the source system and the Excel report, as well as the likelihood of errors. Finally, it is difficult, if not impossible, to have more than one person using an Excel file at any given time, reducing the possibility of coworkers working together.

Evaluating a company for purchase that utilizes Excel-based reporting shouldn’t deter interest, but instead can be looked at as an opportunity.  If the data exists to support relevant KPIs, that should drive the transaction, as there is an opportunity to enhance the reporting system post-close, without having to pay a premium for a company that has already implemented a system.  By understanding what is required for accurate reporting, M&A lawyers can simultaneously identify value creation opportunities for PE firms during the due diligence phase.

So, what are these better KPI reporting tools? Programmers like to distinguish between a “front-end” and a “back-end” in the KPI-centered discipline of “business intelligence”, or “BI”. The “front-end” is what the typical user sees and works with – like the beautiful charts, graphs, and tables of a well-formatted dashboard. The most common front-end analytics tools on the market are Power BI and Tableau, though there are also other products such as Zoho Analytics, Sisense, IBM Cognos. They can do everything that Excel (and especially Pivot Tables) can in displaying and slicing and dicing data, and much more. The “back-end” is more like the large “table” spreadsheet tabs that store (but do not display) transaction lists. For most midmarket businesses, the classic database systems like MySQL and SQL Server are more than up to the task. For heavier loads, though, newer products like Redshift, BigQuery, Hadoop, and Snowflake have distinct advantages for data warehousing.

Using a proper BI system instead of a dashboard spreadsheet has many advantages:

• Data is available in (close to) real-time and is automatically updated

• There is a single “source of truth”

• Different dashboards can easily be created, and automatically maintained, for different users (e.g., one for CFO, one for COO, one for each Regional VP, etc.)

• Entire data sets can be analyzed at a time, instead of, e.g., just the previous month’s data

• Executives can interrogate the data themselves with “drill through” capability, rather than asking a portco Analyst and waiting weeks for a response

So, if BI systems are so vastly superior to Excel, why aren’t they used more? According to Hong, who has one foot in the investment world and one in the IT world, there are likely several reasons. One is simple lack of awareness – he explains “a Harvard MBA I know was analyzing a data set with millions of rows, feverishly trying to build KPIs off half a dozen Excel spreadsheets open all at once.” Despite some improvements, typical business training is falling behind the leading edge of technology. Many of the decision-makers at private equity firms are also far removed from Excel, let alone cutting-edge data analytics. This means that most IT vendors that could help don’t “speak the same language”. Cost – or at least an outdated impression of cost – can also turn people off. Finally, PE firms like to control data flow; Associates understand Excel and can control it, but without training will struggle to supervise portco BI projects.

As advisors to a transaction, understanding the shortcomings of Excel-based reporting and the alternatives available provides greater insight into what to look for during the due diligence process.  Attractive acquisition opportunities should have value creation opportunities post-close, such as the ability to implement BI systems without having to pay premiums for firms that have already taken this step.  This can ensure that not only is reporting up-to-date, visual, customizable, and dynamic, but the process is efficient by having an automated database back-end.  Guiding transactions while outlining future checkpoints for PE firms to add value is key to successful deals, and implementing BI systems can inform decision-making to grow a company.

The solution to execute this effectively is twofold: first, PE firms need to level up their staff through the plethora of cheap and high-quality training that is available at continuing education schools or even online. And second, find trusted vendors who can help navigate both the PE firm, and their portcos, through the process of digitalizing their dashboarding. PE is an industry that is premised on bringing best practices to companies that can benefit from stronger management. Consequently, it’s critical that PE firms become fluent users of the BI new tools that are increasingly becoming the norm in well-managed businesses, or risk falling behind.

U.S. Private Equity Middle Market Report

Pitchbook recently released its 2021 Annual US PE Middle Market Report. The gist? As Pitchbook PE Analyst, Jinny Choi noted, “Middle market fundraising showed slower signs of recovery than the rest of the PE fundraising landscape. However, frenzied dealmaking led firms to deploy capital quickly and return to fundraising at a faster pace—and often at sizable step-ups. Going forward, investors have much to be wary of. Ongoing inflation and higher input prices are stifling company earnings while valuation multiples of growth-oriented companies are taking a tumble with expected interest rate hikes.”

You can download the report for free by clicking here.

Q1 Lower Middle Market Transaction Highlights

Sole Source Capital was active in acquiring companies for its product identification solutions platform, I.D. Images. The acquisitions of Digital Printing Concepts, Multi-Action Communications, and Valley Forge Tape & Label Company more than double the size of the company and extend its reach to several new markets across both the U.S. and Canada. Link

Audax Group was an active seller during Q1:

• The firm sold Mobileum (provider of telecom analytics solutions) to H.I.G. Technology partners Link

• Smart Care Equipment Solutions (provider of commercial kitchen equipment maintenance services) was sold to Zone Climate Services Link

• Specialty food producer, Stonewall Kitchen, was sold to TA Associates Link

• Physiotherapy and rehab focused Lifemark Health Group was sold to Loblaw Companies Link

Sheridan Capital Partners, which closed 26 transactions in 2021 was busy expanding its healthcare-focused platforms:

• Oral Surgery Partners acquired six oral surgery practices Link

• Empower Physical Therapy acquired San Diego-based ProActive Physical Therapy & Sports Medicine; Empower now operates 43 clinics across Arizona, California, Louisiana, and Texas Link

• Atlantic Vision Partners acquired two ophthalmologic and optometric practices in Virginia Link

Solace Capital Partners made a splash in the consumer and sporting goods space by acquiring golf equipment and apparel company, Sun Mountain Sports Link

Kinderhook Industries participated in a wide range of acquisitions, spanning from insurance and automotive to logistics and manufacturing. Acquisitions included:

• Medical Card System (healthcare services organization) Link

• Rental Equipment Investment Corporation (construction equipment rentals) Link

• Mersino and Global Pump (provider of water control solutions) Link

• Kingwire (provider of wire and cable products) Link

• Cord Automotive (designer and producer of running boards, door sills, bed rails, and other automotive accessories) Link

• Avita Pharmacy (HIV-focused pharmacies) Link

• One Guard Inspections (vehicle inspection services) Link

For a full view of transactions from 1Q22 you can click here.

Q1 Lower Middle Market Fundraising

Firmament Announces Final Closing of $475 Million Third Fund Link

Gilde Healthcare Announces €517 Million Northwest Europe Fund Link

Frontenac Closes Oversubscribed Fund XII at $520 Million Hard Cap Link

Other Stuff

CapitalWorks Rebrands as CW Industrial Partners Link

M.B.A.s’ Latest Pitch to Investors: Skip the Startup, Invest in Me Link

BluWave Recognizes Top 50 Private Equity Firms with Inaugural 2022 Innovator Awards Link

January 2022 Lower Middle Market M&A Recap

January was another remarkable month of transactions, fundraising, and activity within the LMM. Despite additional pandemic disruptures and shocks to the public markets, we found this tweet regarding private equity to be illuminating and timely:

In breaking down some of the lower mid-market activity and news from January 2022, a handful of trends and highlights are worth sharing:

1. In terms of deals that closed in January, software/technology and manufacturing/industrial lead the way. However, there’s been a lot of talk about healthcare and transportation deal activity picking up - it could be a trend to watch through Q1.

2. Sole Source Capital was the most active investor making 5 add-on acquisitions across its printing, POS solutions, and supply chain automation platforms.

3. LFM Capital was the most active seller in exiting industrial automation company Eckhart to Arsenal Capital Partners. LFM also sold forestry mulcher manufacturer, Fecon, to Windjammer Capital.

4. Two firms successfully closed funds:

   • Seaport Capital closed its sixth fund with $240 million in capital. Seaport will use the fund to focus on opportunities in business and information services, communication services, and media sectors.

   • Firmament announced the closing of a $475 million, third fund. The firm will continue to concentrate on software and services businesses in the healthcare, logistics, wellness, and environmental sectors. Firmament also announced three locations in Miami, Chicago, and Nashville, where it expects to generate substantial deal flow.

5. Cleveland-based CapitalWorks rebranded as CW Industrial Partners to highlight the firm’s manufacturing and industrial services focus in the lower middle market.

Transactions Happened

Seaport Capital acquired craft beer keg company HopGistics Link

NCK Capital invested in equestrian products distributor English Riding Supply Link

Generation Growth Capital acquired archery sporting goods brand, Killer Instinct Link

Balance Point Capital invested in 35 Taco Bell stores across the Mid-Atlantic region Link

Godspeed Capital acquired Savli Group, a provider of mission critical software and IT solutions to the U.S. Government Link

O2 Investment Partners invested in communications and PR firm, BerlinRosen Link

Search fund, legio X, acquired Brain Power Enrichment Programs with the backing of Sage Capital Partners Link

Other Stuff

Valuations are expected to remain on fire for top-tier companies Link

The great resignation in the middle market Link

A record year in private equity drives competition for lucrative industries Link

This Week’s Feature: Q4 LMM M&A Recap

According to this Refinitiv report, global M&A surpassed $5.5 trillion in 2021 with more than $2.4 trillion in U.S. acquisitions. But when it comes to the lower middle market, which buy-side groups were the most active, and what did they target? In this edition, we’ll be highlighting and ranking LMM activity from Q4 2021.

Although we saw M&A trends play out across virtually every industry, several industries stood out:

1. Information Technology & Services - With information technology being a critical part of today’s enterprise and business operations environment, it’s no surprise that information technology & services deals topped our Q4 LMM charts. We tracked 17 closed deals in the space which is almost 2x the next closest industry. Within the sector, we saw a focus on cybersecurity and defense/federal contractors with acquisitions such as Lone Star Analysis, PhishLabs, Coretelligent, Geocent, AINS, and Varen Technologies.

2. Automotive - We tracked a total of nine closed deals in this industry. Deals ranged from aftermarket parts manufacturers to SaaS workflow automation tools for service centers. Of note, were two acquisitions in the powersports space which include BRS & Co.’s acquisition of Tolemar and Kinderhook Industries’ recap of Coleman Powersports.

3. Construction - Construction finished third on our lower middle-market M&A tracker for 4Q21. We tracked eight total deals in this sector with two infrastructure-related deals in CAI’s investment in Midwestern Electric and Tulcan’s investment in A Greater Austin Development.

4. Computer Software - Software continues to eat the world at the enterprise level. We tracked seven deals in this industry, with a clear trend across enterprise software targeting the SMB market. Deals included investments in AgencyBloc, Beezy, Universign, Fishbowl, Leap, and SalesRabbit.

Most Active PE Firms from 4Q21

1. Main Street Capital - Houston-based Main Street Capital (Main Street) topped our Q4 category ranking as the most active buy-side group. We tracked six investments from the firm, which trades on the New York Stock Exchange as ticker “MAIN”. Main Street also exited its investment in ERP software company CAI Software. Its investments included Orttech (distributor of Ortlinghaus torque control products), Valley Rubber (rubber products manufacturer), DMA Sales (auto aftermarket parts distributor), and Valley Vet Supply (animal health retailer). Main Street also made three investments in human resources companies through Verified Credentials, Credential Check Corporation, and Midwest Backgrounds.

2. CORE Industrial Partners - CORE Industrial Partners (CORE), was another private equity firm busy making investments in Q4. CORE invests exclusively in manufacturing, industrial technology, and industrial services companies in North America. The firm was active in acquiring plastics, biotechnology, machinery, and mechanical/industrial engineering companies. CORE-backed CGI Automated Manufacturing added on Advanced Laser Machining and Precision Metal Fab and Precision Tool & Die. CORE was also an active investor in the 3D printing space with investments in 3DXTECH, Triton 3D, and Gearbox 3D. Its platform, Arizona Natural Resources, acquired HealthSpecialty, a premium skincare products manufacturer.

3. Southfield Capital - Southfield Capital (Southfield) invests in entrepreneur-built, business services companies in the U.S. and Canada. Although we didn’t track any new platform investment in the quarter from Southfield, its portfolio companies were busy with strategic add-on acquisitions. Southfield-backed American Refrigeration Company (HVAC) acquired Global Mechanical, Milrose Consultants (building code and commercial construction consulting) acquired Special Inspection Services, and Protos Security (security guard services) acquired Off Duty Services. Meanwhile, its IT services company platform, Ntiva, acquired NetLogicDC and Navakai.

4. Platinum Equity - Platinum Equity (Platinum) took the number four spot through its Platinum Equity Small Cap Fund. We tracked four investments from the fund, with a heavy emphasis on consumer goods companies. Its platform Petmate acquired Cosmic Pet. Platinum also invested in Oregon Tool (tool manufacturer and distributor) and Pelican Products (protective case and rugged gear/packaging solutions). Along with Vector Capital, Platinum made a splash in the education management industry with its investment in McGraw Hill Education. The firm also exited its Orbit Irrigation (landscaping technology products) investment to Husqvarna Group.

5. The Riverside Company and Rotunda Capital Partners - The Riverside Company (Riverside) and Rotunda Capital Partners (Rotunda) are tied to round out our top five slots. Riverside had four acquisitions and one exit in the quarter, while Rotunda participated in five acquisitions.

   Riverside made two platform investments with its acquisition of Avance Clinical (clinical research services) and Executive Home Care Franchising. Its HVAC platform, Radiant Plumbing and Air Conditioning, acquired Done Service Group. Meanwhile its outsourced managed IT services platform, Logically, scooped up Halski Systems. Riverside also exited its software investment in Bohemia Interactive Simulations to BAE Systems.

   Rotunda’s portfolio companies were busy adding on new acquisitions. Its produce distributor platform, FreshEdge, added on Vine Line and Monteverde’s. Its loading, hauling, and automotive brands platform, Motis Brands, acquired Pier of d'Nort (aluminum pier systems manufacturer) and Mac’s Custom Tie-Downs (tie-down systems for trailers/truck beds). Meanwhile, its platform American Equipment added on Washington Crane & Hoist (crane maintenance and repair).

Recent Fundraising

Ascend Partners closes inaugural healthcare fund at $570 million Link

Crown Capital Investments launches $250 million evergreen fund Link

Other Stuff

The retail LBO model is dying Link

Q3 PE lending league tables Link

Recent PE deal activity is the hottest it has been in 20+ years Link

Beartooth Group has raised $100 million in funds to buy distressed ranch properties Link

This Week’s Feature

The big news out of Congress last month was the passing of President Biden’s $1.2T infrastructure bill: The Infrastructure Investment & Jobs Act (IIJA). Given it took months of deliberation in the current political climate, the passing of IIJA with bipartisan support made it something of a modern miracle.

Biden’s $2.3T proposal lays out a plan to rebuild the nation’s roads and bridges, shift to renewable energy and expand broadband access. And boy, do we need it. The American Society of Civil Engineers recently published a report card on America’s infrastructure and graded it a C-. That’s a concerning score for a nation that considers itself to be a global superpower.

The bill delivers an opportunity for both the public and private sector to participate in America investing in itself again. However, there is a lot to still figure out from an execution standpoint. There’s hope that by both streamlining the federal permitting process and expanding opportunities for public and private co-investment through public-private partnerships (P3s), the country can radically reshape how we approach infrastructure investments. But as is often the case with these types of things, bureaucracy manages to rear its ugly head.

In looking ahead, where are there opportunities for private equity? As this article from The Brooking Institution points out, by almost any measure, IIJA is enormous. “The roughly $1.2 trillion bill contains an estimated $550 billion in new spending above baseline levels. This spending touches every sector of infrastructure, from transportation and water to energy, broadband, and the resilience and rehabilitation of our nation’s natural resources. While topline numbers from Senate summaries show us the general trends in funding distribution—over half of new spending is transportation-focused—the magnitude of these investments warrants a deeper dive.”

For lower middle-market private equity groups, there’s hope that local and state governments will turn to them for smaller projects on shorter timelines that won’t get the attention of some of the larger players.

Without question, the bill marks Biden’s biggest legislative victory to date and appears to be favorable news for U.S. private equity investors. It has the potential to be a big boost for investors in the transportation and broadband sectors which will see a steep increase in topline above-baseline spending. However, due to the sheer size of the undertaking and the required cooperation from both the private and public sector we’ll have to wait before we declare the passing of this bill a victory for the nation’s infrastructure.

This Week’s LMM Activity

EquiPro Holdings-backed Security Credit Services acquires non-performing receivables co., Jormandy Link

The Riverside Company invests in Executive Home Care Franchising Link

Architect Equity acquires Timec Oil & Gas from Ferrovial Link

Centerbridge Partners and The Vistria Group-backed, Help at Home acquires Ohio-based Prime Home Care Link

Tower Arch Capital exits its investment in branded footwear co., KNS International Link

CenterGate Capital completes the sale of Owen Equipment Company to Wynnchurch Capital Link

CURO acquires consumer finance co., Heights Finance, from Milestone Partners Link

Blue Sea Capital-backed Spectrum Vision Partners acquires Stahl Eyecare Experts Link

Godspeed Capital acquires public and private sector engineering consulting services provider, Ascent Engineering Group Link

Silver Oak Services Partners-backed Pallet Logistics acquires Pal-Serv Link

H.I.G. Capital Exits recycling and packaging co., Sustana, to Blackstone Link

Seacoast Capital invests in parcel delivery co., Lone Star Overnight Link

Main Street Capital invests in automotive parts supplier DMA Sales Link

Main Street Capital and Iron Creek Partners invest in three background screening companies Link

Rotunda Capital-backed FreshEdge acquires produce distributor Monteverde’s Link

HealthEdge Investment Partners completes the sale of I/DD service provider The Columbus Organization to CareSource Link

Gladstone Capital invests in wetsuit brand Xcel Link

Fundraising

Beringer Capital closes Fund IV with $307M to focus on digital transformation Link

Other Stuff

Implementing data-driven strategies for SMB’s Link

Bridgepoint’s Q4 trucking and logistics M&A update Link

Meanwhile, the SaaS M&A market is expected to break transaction volume records by year-end Link

Why the next Warby Parker or Allbirds might not be backed by VC Link

Retailers are acquiring logistics companies to help control the supply chain Link

This Week’s Feature

This week we're highlighting DealBuilder by Paratus Business Resources. DealBuilder is a deal support platform re-inventing the business-for-sale process for Main Street and the Lower Middle Market.

After operating under the traditional brokerage model for the past decade, Co-Founders Keith Mackenzie, Mike Lenz, and Morgan Tate recognized a few problems:

• Not every business requires a full-service broker, but most owners are unprepared to sell their business themselves.

• Inconsistent deal processes (NDAs, CIMs, valuations, etc.) cause deals to fall apart.

• M&A transaction costs are significant in comparison to other industries

Having previously completed over 250 successful transactions, the team has witnessed the good, the bad, and the ugly of M&A. Learning from these experiences, DealBuilder is designed to reduce transactional costs while keeping the deal process simple & efficient for both buyers & sellers.

DealBuilder offers a flat 2% fee-for-service model to Sellers and is free for Buyers. As a part of their fee, DealBuilder Sellers receive:

• A dedicated 'Deal Manager' for support throughout the entire sales process

• Access to DealBuilder's valuation software

• Their own 'Digital CIM' to present to buyers (see an example CIM here)

DealBuilder is industry agnostic and currently works with Sellers across Canada, the USA, and the UK.

You can learn more about DealBuilder by visiting the following links:

• Click here to learn more about selling with DealBuilder

• Register as a buyer for free here

Or you can reach out to DealBuilder's Co-Founder, Morgan Tate, directly at morgan@paratusbr.com or watch his interview on Acquisitions Anonymous here.

This Week’s LMM Activity

Peterson Partners, Trilogy Search Partners, and Maven Equity invest in hospice and home health co., Ennoble Care Link

CAI Capital Partners invests in traffic infrastructure electrical services provider, Midwestern Electric Link

Southfield Capital-backed Ntiva expands IT services footprint in Washington DC and the Rocky Mountains with acquisitions of NetLogicDC and Navakai Link

Nova Capital Management and Landon Capital Partners acquire engine management and fuel systems co., Wallbro Co. Link

SaaS platform Reepay joins forces with PSG-backed billwerk Link

NexPhase Capital sells Popcornopolis to Grupo Bimbo Link

HCI Equity Partners-backed Tech24 acquires Commercial Kitchens Link

PSG acquires SaaS-based electronic signature solutions, Universign Link

Michigan Institute of Urology (MIU) Joins Lee Equity Partners-backed, Solaris Link

RiverGlade Capital-backed USOSM partners with Oyster Point Oral & Facial Surgery of Newport News, VA Link

PennSpring Capital exits Securus Contact Systems and acquires Mobiniti to bolster its business process outsourcing portfolio Link

Nexphase Capital invests in healthcare marketing agency, Calcium Link

Seaport Capital invests in live entertainment co., Family Entertainment Holdings Link

Southfield Capital-backed American Refrigeration Company acquires Global Mechanical Link

HC Private Investments invests in logistics co. to the QSR market, Customized Distribution Link

Stone-Goff Partners sells marketing and sales solutions provider, The Channel Company, to EagleTree Capital Link

Fundraising

True Wind Capital raises $817m to invest in leading technology companies Link

Canadian based Iron Bridge Equity Partners raises Fund IV at C$383m Link

Other Stuff

Peterson Partners: Brand building and entrepreneurship with Davis Smith Link

Grand Rapids-based Blackford Capital, spreads its wings Link

McDonald’s and IBM are partnering to bring AI-powered drive-thrus to restaurants Link

Despite losing market share, smaller asset managers keep battling the giants Link

This Week’s Feature

The lower middle-market M&A environment continues to be as competitive as it’s ever been. While momentum will likely continue into the near future, deal flow and deal sourcing drive much of the conversation. However, when it comes time to close on a deal, many lower mid-market deal teams lack adequate preparation and strategic planning, which can cause deals to fall short of expectations. If due diligence isn’t a top priority it probably should be.

According to this National Center for The Middle Market report, the majority of buyers in the middle market have limited M&A experience. In fact, about 30% of buyers polled for the report were working on their very first deal. For many of these buyers, the due diligence process can be more confusing and difficult than expected. With inexperience causing many deals to fall short, what options do groups have for due diligence assistance?

For those pursuing deals in the $500k to $25MM range, DueDilio can be a great resource. DueDilio is a due diligence concierge connecting business buyers and private investors with quality, pre-vetted, due diligence solutions. DueDilio has a deep network of independent professionals, boutique, and mid-size firms that can address finance, legal, technology, operations, HR/benefits, and other diligence needs. Today, DueDilio’s network includes over 120 diligence providers in addition to complementary partnerships that extend its capabilities.

Today more than ever it’s important to uncover and evaluate the risks inherent in M&A as well as private investments.  Whether you leverage DueDilio to source a vetted professional or have in-house capabilities, it’s a good idea to have a neutral third party weigh in on the due diligence process.

To learn more about DueDilio you can head to www.DueDilio.com or reach out to its Founder, Roman Beylin, through roman@duedilio.com.

This Week’s LMM Activity

LLR Partners invests in global life science product manufacturer and distributor, Genesee Scientific Link

LLR Partners-backed Appspace acquires digital workplace and intranet solution provider, Beezy Link

The Vistria Group sells hospice provider, Agape Care Group, to Ridgemont Equity Partners Link

MiddleGround Capital Acquires Plasman Holdings, Its Third Automotive Platform in 14 Months Link

Seaport Capital invests in telecommunications company, Municipal Communications Link

Platinum Equity sells watering and irrigation products co., Orbit Irrigation, to Husqvarna Group Link

Platinum Equity-backed Petmate, combines with Cosmic Pet Link

Performant Capital acquires SaaS provider of automotive service workflow tools, Bolt On Technology Link

VSS Capital Partners sells IT support, cybersecurity, and cloud services co., Coretelligent to Norwest Equity Partners Link

Edgewater Capital Partners-backed Naprotek acquires SemiGen, an RF/Microwave products co. Link

Edgewater Capital Partners sells chemical industrials co., DanChem, to Synalloy Corporation Link

HCI Equity Partners-backed MSI Express acquires contract manufacturer., PacMoore Products Link

CORE Industrial Partners furthers its investment into 3D printing with the acquisition of 3DXTECH, Triton and Gearbox Link

New Water Capital acquires HMI Solutions Provider Nelson-Miller Link

Fundraising

Timber Bay Partners closes fund II at $305m Link

Sole Source Capital closes its second fund with commitments of $555m Link

STG Partners raises over $860m for inaugural STG Allegro Fund Link

Other Stuff

Using emotional intelligence to improve M&A negotiations Link

Revving the software engine Link

The cannabis market is quickly attracting distributors Link

Big investors keep pouring money into alternative asset classes such as music rights Link

This Week’s Feature

On the heels of last week’s search fund edition, we wanted to highlight an active search fund in this week’s edition: Deer Point Partners. Tim Buehn is the Founder and Managing Director of Deer Point Partners. Prior to founding the firm, Tim served in the Navy as a fighter pilot, operations officer, and safety office before embarking on an MBA degree through Harvard Business School. While pursuing his MBA, Tim spent time as a summer associate at McKinsey and at a tech-enabled, mortgage platform, UpEquity.

Given his background as a collaborative team builder and leader in both combat and the business world, Tim decided to dedicate the next portion of his life to acquiring and operating a high-quality company in the B2B services space. He is supported by an array of experienced operators and institutional investors including Pacific Lake Partners, Trilogy Search Partners, Miramar Equity Partners, and Aspect Investors. We look forward to following Tim’s journey as an operator where he has no shortage of lessons he can apply from his experience in both the public and private sector.

Know of an opportunity for Tim or want to reach out? You can do so through timbuehn@deerpointpartnersllc.com.

This Week’s LMM Activity

Platinum Equity was active in acquiring manufacturer of protective cases, Pelican Products Link

Platinum Equity also acquires manufacturer and distributor of professional-grade cutting tools, Oregon Tool Link

The CapStreet Group invests in Credit Bureau Connection, a credit report and compliance solutions to the automotive and consumer finance industries Link

BRS & Co. acquires powersports company, Tolemar, from Vopne Capital Link

Silver Oak Services Partners invests in cloud hosting services co., Summit Hosting Link

The Cranemere Group buys outpatient imaging operator for $400M from ICV Partners Link

Concentric Equity Partners and Northaven Capital Partners sell wind energy services and repair company, Airway Services, to Takkion Link

Hernando County Emergency Physicians joins Varsity Healthcare Partners-backed Emergency Care Partners Link

MPE Partners invests in arts and crafts consumer goods co., DecoArt Link

RiverGlade Capital-backed CityVet continues expansion with acquisition of River City Companion Animal Hospital Link

Other Stuff

HBR: The 5 fronts of digital transformation in the middle market Link

The great resignation is accelerating Link

A secretive hedge fund is gutting newsrooms Link

This Week’s Feature

This week we’re uncovering the world of search funds and search fund investing. This niche of investing has picked up steam over the last decade but owes its roots to the 1980s, when a professor at Stanford University’s Graduate School of Business, H. Irving Grousbeck, originated the concept. The idea is that through an investment vehicle, investors can financially support an entrepreneur’s efforts to locate, acquire, manage, and then grow a privately held company.

According to this 2020 Search Fund Study by Stanford’s Graduate School of Business, search funds are launching at record volumes. From 1984-2019, 401 search funds were formed in the U.S. and Canada, while 88 of them were launched between 2018-2019. Once upon a time, Harvard and Stanford were the only schools offering courses on search funds, but today that list has grown significantly.

Additionally, the 2020 study showed that during 2018-2019:

• Average duration to complete an acquisition was 23 months

• Median acquisition price was $10mm

• Median EBITDA multiple paid was 6.0x

• 33% of searches ended without an acquisition

Independent Sponsors vs. Search Funds vs. Private Equity

There’s often some confusion as to the different private equity models. So what’s the difference between an independent sponsor, search fund, and traditional private equity?

One difference is that traditional private equity firms have raised a pool of committed capital in which they pull to acquire multiple companies. These firms have committed equity capital behind them and can invest in a company without outside approval from investors. Once a company is acquired, a private equity firm is involved in many aspects of the business but does not typically take control of day-to-day operations.

Independent sponsors and search funds act as fundless sponsors who raise funds on a deal-by-deal basis. Whereas an independent sponsor generally does not take on the day-to-day operations of a company, a search fund seeks to acquire a single business and then operate it. Additionally, a search fund raises capital from investors to fund the search process. In exchange, search fund investors receive the right, not obligation, to invest in the equity to finance the acquisition. These investors also receive the benefit of a stepped-up conversion of the search capital into the securities issued from the acquired company. This is a key difference between the two fundless sponsor types. Independent sponsors come in all ranges and sizes, some have incredible relationships with family offices and private equity and the ability to quickly close deals, while others do not. Conversely, a search fund has investors who have already committed search capital and thus have skin in the game. From a sell-side perspective, it can be more efficient for a search fund to close on a deal because of the investor pool that has already backed the searcher.

Search fund investors

The Stanford study cited above shows that $1.4b of equity capital has been invested in search funds since 1984. The aggregate pre-tax IRR for investors was 32.6% with a return on invested capital of 5.5x. It’s no wonder there has been a rush of firms to participate in these deals. We’ve compiled a list of active search fund investors below. Some firms listed solely focus on the search fund model, while others have layered on a search fund model into the firm’s overall private equity strategy:

• Aspect Investors

• Anacapa Partners

• Search Fund Partners

• Endurance Search Partners

• Miramar Equity Partners

• Alza Capital Partners

• Pacific Lake Partners

• Peterson Partners

• Relay Investments

• Granite Point Partners

• WSC & Company

• Futaleufu Partners

• Bradford Brown Capital Partners

• Ashford Venture Partners

• The Cambria Group

• Double R Partners

• Graue Mill Partners

• Housatonic Partners

• M2O

• ETA Equity

• Maven Equity Partners

• OPERAND GROUP

• Liberty Search Ventures

• Riviera Capital

• Vonzeo Capital

• Kinderhook Partners

• Sage Capital Partners

• Istria Capital

• Hunter Search Capital

• Greyhart Capital

• Cerralv Capital

• Cityfront Growth Partners

• Mertal Family Partners

• Saltoun Capital

• Iron Creek Partners

• Red Forest Capital

If interested in learning more, here are some additional resources that we have gathered:

• 2020 Stanford Business School search fund study Link

• Searchfunder - the largest online search fund community Link

• Search funds from the investor’s perspective Link

• SearchFund.org Link

This Week’s LMM Activity

Search fund, Nova Vida, has acquired Ti Foods, a leading provider of Asian food products across Canada Link

Tide Rock Holdings acquires Pikes Peak Plastics Co. to grow plastics portfolio Link

Blackwell Capital acquires aerial equipment reseller, Stack Equipment Link

1847 Holdings acquires two companies to expand its cabinetry platform Link

Sunrise Treatment Center, a Bridges Fund Management portfolio co, acquires addiction treatment provider, Port 45 Recovery Link

Aries Capital launches new platform with the acquisition of Lyft’s Atlanta Driver Service Center Link

Longshore Capital Partners announces sale of Eclipse Advantage, a warehouse labor management company, to Two Sigma Link

Incline Equity Partners invests in residential cleaning services co, Perfect Power Wash Link

Andlauer Healthcare Group acquires Boyle Transportation, a transportation company to the life sciences industry Link

Fundraising

Balance Point Capital closes its sixth fund with $580mm in commitments Link

Genesis Park launches new $275 million fund Link

Other Stuff

Q3 US PE breakdown Link

Transforming how lower middle market healthcare firms are represented Link

Private equity funds, sensing profit in tumult, are propping up oil Link

This Week’s Feature

This week we’re putting a spotlight on the hot world of e-commerce M&A and profiling Hahnbeck, a London-based corporate finance firm focused on e-commerce. Hahnbeck connects buyers and sellers of e-commerce and technology businesses. The firm is led by Director, Taliesen Hollywood, with an experienced team spread across the UK and North America. Originally focused on education in the M&A space, in 2019 the firm converted to a full-service M&A consultancy and has become one of the leading e-commerce M&A firms in all of Europe.

Given that it’s 2021, you’ve probably heard of a little business called Amazon and the world of FBA (Fulfilled by Amazon). FBA businesses are offered by a third-party seller but shipped to you from an Amazon Fulfillment Center. With the recent shift from brick and mortar to online accelerating, FBA businesses have seen a drastic increase in investor interest, and Hahnbeck knows this world intimately. In fact, according to this comprehensive Amazon FBA Acquirers list that was published by Hahnbeck, there are now over 70 FBA aggregators that have raised around $10B in disclosed funding (debt + equity). Many have heard of Thrasio, who was one of the first and now largest acquirers of Amazon FBA brands, but many have since followed suit. It’s only a matter of time before we see an FBA aggregator go public.

We like Hahnbeck’s approach to providing a premium level of service while maintaining a commission structure that is the lowest in the industry. They’re able to do this by hiring experienced M&A professionals while operating on a distributed basis and with low office overhead. The lower-middle market M&A space is not known for its transparency, with brokers keeping “secret” lists of buyers, so as to convince business owners that they are the sole conduit through which these buyers can be reached. Hahnbeck bucks this trend by providing leading insights into the industry and comprehensive lists of active players on both sides of the FBA marketplace.

Although Hahnbeck specializes in FBA and e-commerce M&A, the firm has clients in the technology and e-commerce adjacent sectors. The firm has e-commerce clients ranging from $2m to $200m and provides a bespoke, tailored service to each client, targeting strategic buyers and PE firms specific to each client’s business. Hahnbeck also has the deepest understanding of the Amazon Aggregator space in the industry.

You can learn more about Hahnbeck and the world of Amazon FBA Aggregators by visiting the following links:

• Hahnbeck website Link

• List of Amazon FBA aggregators Link

• Amazon Aggregators’ Fight for Ascendancy (Financial Times )Link

You can reach out to Taliesen and Hahnbeck through th@hahnbeck.com

This Week’s LMM Activity

H.I.G. Capital was active:

• Invests in streetwear and digitally native jewelry and accessories co., The Gld Shop Link

• Acquires pharmaceutical provider, Aspire Pharma Link

Granite Creek Capital Partners and Equivu Capital invest in heavy equipment manufacturer and distributor, C&C Manufacturing Link

Miramar Equity Partners-backed TopSide Marinas acquires two marinas in Oklahoma and Texas Link

Tech-24, backed by HCI Equity Partners, acquires HVAC and food service equipment installer and maintenance provider, Yukon Refrigeration Link

HCI Equity Partners sells circuit board manufacturer, Summit Interconnect, to Lindsay Goldberg Link

Seacoast Capital and Galaxi Group invest in CityLeaf & Medallion Landscape Link

WILsquare Capital acquires manufacturer and distributor of heating and air movement solutions, Rock Energy Systems Link

East Los Capital invests in cloud computing services pioneer, Caylent Link

Fort Point Capital invests in telecom infrastructure company, CellSite Solutions Link

Susquehanna Private Capital invests in language technology and localization solutions provider, thebigword Group Link

Essex Bay Capital makes first platform investment in municipal and school district SaaS company, Munetrix Link

HKW sells air filter company, Protect Plus Air, to Freudenberg Filtration Technologies Link

Falfurrias Capital Partners acquires leading honey brand, Local Hive Honey Link

Blue Sea Capital-backed, Beacon Oral Specialists, continues dental practice roll-up with the acquisition of Maryland Oral Surgery Associates Link

Patient engagement solutions provider, Health Perspective Group, receives investment from 424 Capital Link

1315 Capital and MoonSail Capital acquire employer-focused healthcare cost containment company, Homestead Link

NCK Capital sells cosmetology and beauty school, The Ogle School, to RLJ Equity Partners Link

Fundraising

Concentric closes inaugural fund with $266M in commitments from the SBA Link

Other Stuff

Monroe Capital closes $505M CLO secured by a portfolio of middle-market senior secured loans Link

An unprecedented year for private equity is spilling into the middle market Link

What’s driving food & beverage M&A activity? Link

More sponsors are adding minority investments to their strategies as competition for deals continues to rise and founders exert more power in negotiations Link

Bridgepoint’s Tech M&A Q3 update Link