Throughout 2023, the U.S. M&A landscape has been significantly shaped by a notable rise in distressed M&A transactions. According to bankruptcy filings from the U.S. Courts, the number of Chapter 11 bankruptcies increased 45.5 percent when comparing the first six months of 2023 with the first six months of 2022.
This surge in Chapter 11 bankruptcies has created a unique environment ripe for distressed asset acquisitions. The aftermath of the COVID-19 pandemic resulted in higher cost of debt, tighter credit, supply chain disruptions and atypical financial performance, among various other factors, which has led to a wave of companies seeking bankruptcy protection under Chapter 11.
These distressed businesses have become attractive targets for investors and acquirers looking to capitalize on opportunities presented by the distressed assets.
As a result, the increase in distressed M&A activity throughout 2023 has created an opportunistic marketplace where distressed companies are often sold at a discount, presenting strategic investors and private equity firms with the chance to acquire valuable assets, brands and intellectual property at favorable prices. However, many distressed companies engage in an auction process, which further intensifies the competition among prospective buyers.
This environment has not only provided opportunities for investors but has also allowed struggling companies to secure a lifeline and continue operations under new ownership, potentially preserving jobs and industry presence.
As distressed M&A continues to be a defining feature of the U.S. M&A landscape throughout the remainder of 2023, it underscores the adaptability and resilience of the business community in navigating challenging economic circumstances.
M&A Market Activity
The rollercoaster trend continued for domestic deal volume throughout the month ending September 2023, as month-over-month deal volume declined following month-over-month growth displayed in August 2023. Overall deal volume within the U.S. for the quarter ending September 2023 declined by 11.1 percent when compared to the quarter ending June 2023.
The Pittsburgh M&A market experienced mild turbulence with regard to deal volume as the quarter ending September 2023 contracted by 4 percent when compared to the quarter ending June 2023. September 2023 saw several noteworthy transactions in the Pittsburgh area, with Tecum Capital Management, ThoroughCare and LegalSifter, all companies with a greater-Pittsburgh presence, completing acquisitions within the month.
Deal of the Month
Tecum’s platform investment The Basement Doctor, which focuses on water displacement services through its brands Basement Doctor and NASH Distribution, completed an acquisition of Matthews Wall Anchor and Waterproofing, a leading provider of wall anchor and waterproofing services for both residential and commercial customers.
Bud Norton, Matthews CEO and owner noted, “When I made the decision to find the right partner for my business, I quickly found Tecum to check all the boxes. They have experience in my space, and they demonstrate the word partnership in their actions.” ●
Mike Kostandaras is an Associate 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].