January 2022 Lower Middle Market Recap

Feb 4, 2022

Happy Friday and welcome to this month’s edition of The Lower Middle Market. We’re the only news source tracking lower middle market M&A. Our goal is to keep you up to date on what’s happening in the market by highlighting the latest news, transactions, and activity.

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:

Andrew Finn @finnscave

There is a beautiful purity to buy and hold PE. After you purchase, the prevailing "institutional market" doesn't matter. The fed doesn't matter. Follow on funding doesn't matter. Upstream investors don't matter. Can you pay off debt and make distributable cash, that's it.

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

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