Sharply increasing inflation rates over the past two and a half years in the U.S. are a result of several contributing factors, but none more than the relationship between the prices for goods and services, and the labor market.
As the ratio of job vacancies to unemployment has steadily increased, labor market participants and jobseekers alike have bargained for better pay. This has led businesses to charge more for goods and services to meet the rising demand for higher wage rates. After more than 10 consecutive quarters of increased Federal Funds Interest Rates, Federal Reserve Chair Jerome Powell’s strategy to temper the aforementioned pricing pressures may finally be achieving relative success. At the end of June 2023, the reported U.S. inflation rate reached approximately 3 percent, the lowest rate since March 2021. The decline in U.S. inflation is a step in the right direction and may allow for the past two years of increased borrowing costs to subside.
While the domestic cost of capital has increased, it remains at a relative historical low — an important factor when analyzing domestic M&A market activity. The recent modest decline in overall deal activity appeared to be inevitable relative to the near-historic pace of closed transactions that followed the COVID-19 pandemic. And overall transaction values remain at record levels due in part to:
- Tremendous amounts of committed, but uninvested, private equity capital
- Generous levels of cash on corporate balance sheets
- Relatively low costs of capital
- Financial institutions’ propensity to lend on high-quality assets
M&A Market Activity
U.S. deal volume declined in June as compared to the prior month. Through the first two quarters of 2023, U.S. M&A deal volume decreased by 16.1 percent compared to the second half of 2022.
The Pittsburgh M&A market experienced a welcome increase in deal volume in June as 24 transactions closed throughout the month, compared to 14 in May. June also saw several noteworthy transactions in the region, with Pittsburgh-based companies PGW Auto Glass LLC and Westinghouse Air Brake Technologies Corp. (NYSE: WAB) completing transactions within the month.
Additionally, McVay Plumbing Co. Inc. was acquired by Legacy Service Partners LLC.
Deal Of The Month
Heeter, a full-service provider of secure print, direct mail and fulfillment solutions located in Canonsburg, Pennsylvania, acquired Pittsburgh’s Laurel Print & Graphics.
The strategic acquisition offers expanded capabilities such as large-format print and signage, which will be added to one of the largest assortments of commercial print and digital solutions in the Mid-Atlantic region.
Scott Heeter, CEO of Heeter, says, “Laurel’s leadership, skilled team and capabilities in large-format print and signage are excellent additions to Heeter’s capabilities. This acquisition allows both companies to offer customers a broader portfolio of services to meet their marketing and sales needs.”
Keith Jones, president of Laurel, says, “We’ve enjoyed a strong business partnership with Heeter for many years. As we look to the future, it made sense to join forces to better serve our client base with an extended set of products.”
Keith Jones will become president of the Laurel Division, and all Laurel employees will become part of the Heeter team. ●
Anthony Melchiorre is a vice president with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected].
