The results are in: investors and strategic buyers looking for M&A action should look to the South. According to the recently released H1 2014 edition of Mergermarket’s overview of M&A deal flow in the Americas – Deal Drivers Americas – more deals were done in the South in the first half of 2014 than in any other region in North or South America. And if this level of deal velocity continues through the second half, 2014 will easily be the biggest year of the last five in the South.
To understand what is fueling this elevated level of M&A activity in our region, we turned to Investment Banking South, which is FourBridges’ new online portal for on-the-ground, real-time observations about Middle Market M&A activity and access to capital in states where our firm is active: Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee and Virginia.
What’s behind the strong M&A market in the South? Here’s what our expert sources are telling us:
- Valuation are multiples more reasonable in the South than in other parts of the country, which attracts out-of-state investors who are being priced out of their own markets. Most of the money keeping deals flowing in the South is coming from outside the region.
- Foreign investors looking for opportunities in the U.S. are searching outside their regular haunts on the East and West coasts and are discovering the South.
- The South’s business-friendly tax and regulatory environment allows more of the capital invested in a business to stay in the business and fuel growth – which makes companies more attractive to both investors and strategic buyers.
- Capital is available in the South for companies with a solid business plan and a good opportunity for growth, especially for larger companies with EBITDA over $10 million.
- State governments in the South are assisting capital formation by attracting headquarters of major companies and proactively working to help existing businesses to grow. For example, Tennessee’s Commissioner of Economic and Community Development said programs the state has introduced to increase entrepreneurial activity and attract capital, such as Launch Tennessee, are beginning to reap rewards – including helping out-of-state private equity groups partner with local investors.
- According to Bruce Doeg, chair of Baker Donelson's Business Department in Nashville, Tenn., southern cities doing especially well at attracting capital include Atlanta, Nashville, Memphis and New Orleans.
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