Q4 2021 Lower Middle Market Breakdown
Week of January 3rd LMM Update
Happy Friday and welcome to this week’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.
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:
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.
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.
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.
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
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.
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.
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.
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.
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).
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