The M&A Market Is Back. Buyers Are Targeting These Industries.
M&A deal activity has recovered from its 9-month pandemic-related dip. Based on the overall strength of the stock market, we expect continued strong mergers and acquisitions activity for 2021 as well.
The total dollar value of mergers and acquisitions announced in the U.S. fell to roughly $20 billion in March as the pandemic set in, according to data from Barrons. That was a sharp drop-off—from about $180 billion in January. Yet the recovery has been equally sharp. Deal volumes reached approximately $205 billion in October according to Barron’s data.
Looking forward, Rich Jackim, managing partner at Jackim Woods & Company said, “low-interest rates, optimism about a COVID vaccine, record-breaking fundraising by Special Purpose Acquisition Companies (SPACs), and even a less contentious global trade policy will all contribute to continued strong M&A activity in 2021.”
Interest rates are currently at historic lows, reducing the cost of funding acquisitions. In addition, the good news about several COVID vaccines provides a light at the end of the tunnel and the assurance that buyers need to make a purchase.
And SPACS—special purpose acquisition corporations that raise money through an initial public offering in order to buy other companies—have raised more than $64 billion this year. SPACs raised just $13 billion in all of 2019, suggesting that SPACs will be the new driver of middle-market M&A activity in 2021.
“The M&A wave is regaining momentum and should continue for the next 12-18 months,” Jackim says. He believes the following industries will see an uptick in M&A activity in 2021.
2021 will be a year of recovery as retail and restaurant workers displaced by COVID-related closures seek other careers and gainful employment. As a result, Jackim believes the vocational/technical training and education sector will of interest to buyers and investors. The US has been suffering from a shortage of skilled workers for over a decade, so there are plenty of high paying jobs available for people with the right skills. Enrollment in vocational programs tends to rise as unemployment rises, so we expect 2021 to build on the strong results that the technical education industry saw in 2020, and to attract renewed interest from both financial and strategic buyers and investors.
The energy industry is another industry where we expect to see a lot of M&A activity in 2021. The price of crude oil has dropped to just above $40 a barrel since early summer, nowhere near the $63 a barrel price at the beginning of the year. At the same time, the rise of clean energy and potential regulation are threatening companies that focus on traditional fossil fuels. As the fossil fuel industry shifts toward a lower-growth model, exploration and production companies will be looking to generate returns through acquisitions that would yield economies of scale and other benefits, or diversify their product or service offerings away from fossil fuels.
Private Equity Buyers Are Busy In Education Sector
Private equity investors have shown strong interest in education-focused companies in the last few years, and not just in edtech companies. Several things are responsible for this renewed interest.
- For the last 10 years, digital transformations in the classroom has caused the ed-tech market to soar and has led to an increased interest in all types of education-related investments.
- The U.S. faces a significant skill shortage across the board as our population gets older and as our society emphasizes professional careers over skilled-based careers. This had led to severe shortages in healthcare, the trades, and transportation.
- Approximately 30% of for-profit career colleges or vocational schools went out of business between 2008 and 2016, removing excess capacity from the post-secondary landscape, which led to a resurgence of interest from private equity groups.
- For the last four years, both the Republican administration and the Democratic Congress supported private education, which resulted in an upsurge in funding by federal, state, and local governments.
On top of that, the education industry is very fragmented, with many early childhood centers, career colleges, and training companies still owned by individuals, leaving private equity firms a lot of room for roll-ups to consolidate the industry and realize significant economies of scale.
In addition, the K-12 market has become more complicated, with new technologies rapidly changing the game. So having the right people in charge who know how to design and implement digital learning platforms is increasingly important, representing a unique opportunity for private equity and other tech-savvy investors. As a result, buyers and investors are spending more and more time developing world-class management teams to ensure their portfolio companies can provide teachers and students with the digital platforms and technical support they need to succeed.
For the past decade or so, buyers have been hesitant to invest in post-secondary education companies — ever since the Great Recession and implementing the Gainful Employment Rule during the Obama administration. However, things have turned around completely in the last four years for several reasons, including…
- Over 200 poorly run for-profit career colleges closed their doors before the 2017-18 academic year — continuing a long downward trend. But happily, at the well-run schools that survived, enrollment and revenue are rising again.
- The regulatory environment is more favorable because the Gainful Employment Rule has been greatly scaled back – even though it remains on the books for now.
- Most for-profit career schools are demonstrating better results regarding educational outcomes like gainful employment, making them more appealing to investors no matter the level of regulatory oversight.
- The education sector tends to do well in a recession. In general, post-secondary education does well when the economy slows down and unemployed people go back to schools, so education-related companies are a good hedge against recession in any investor’s portfolio.
- Valuations of early childhood centers, K-12 schools, and career colleges remain reasonable compared to other education sub-sectors like edtech.
- It isn’t just investors who’re interested in this space – lenders have returned as well. For example, Renovus Capital financed the Rasmussen acquisition with SunTrust, CIBC, and Bank of Ireland. NCK Capital financed its purchase of Tricoci in partnership with Greyrock Capital Group and NBH Bank.
That’s all good news for owners of education-related companies. Here are just a few of the deals in the education sector over the last few years —
- The Learning Experience, was purchased by Golden Gate Capital Partners Group-backed KinderCare Education, acquired Troy, Michigan-based Rainbow Child Care Center from Quad-C Management.
- Rasmussen College, a healthcare-focused career college system with 10,000 students across 22 campuses, was acquired by Renovus Capital Partners.
- The University of St. Augustine was acquired by Toronto’s Altas Partners in a deal worth $400 million.
- Allied Business Schools, which offers online real estate certification classes, was acquired by Colibri Group and Quad-C Management.
- Chicago-based Tricoci University of Beauty Culture was acquired by Dallas’s NCK Capital.
- Texas County Technical College in Houston, Missouri, was acquired by Arizona College.
- The National Business Institute of Florida was acquired by a private investor.
If you own an early childhood center, a Title IV career college, or a corporate training program and are interested in potentially selling, contact us at 224-513-5142 for a free, confidential, no-obligation discussion about the current market and your options.
About the author: Rich Jackim, the managing partner of Jackim Woods & Co, is an experienced M&A attorney, investment banker, business broker who has sold over 100 businesses. He is also an education sector entrepreneur who founded and sold a professional training company, so he understands the industry and the sales process from both an owner and a buyer’s perspective. If you are thinking of selling your early childhood center, K-12 school, career college, or training program, he would be happy to speak with you. His direct dial number is 224-513-5142, and his email is rjackim@jackimwoods.com.
Veritext Acquires David Feldman Worldwide Court Reporting
Veritext, the national leader in court reporting and litigation support solutions, announced that it has acquired David Feldman Worldwide (DFW) Court Reporting. DFW’s experience with very complex litigation cases and exemplary customer service complements Veritext’s full breadth of technical solutions and world-class data security. Together they will offer clients of both companies premier court reporting and litigation support solutions.
“DFW’s expertise in very complex litigation fits well with the experience and advanced technology Veritext brings to the table,” said Nancy Josephs, Chief Executive Officer of Veritext. Clients of DFW will have immediate access to Veritext’s state-of-the-art deposition suites, multimedia depositions, document repositories, remote depositions, online and mobile scheduling, paperless depositions and more. In addition, they will experience the world-class, HIPAA-compliant data security Veritext offers. “Combining the services of both companies makes the perfect union,” Josephs continued.
DFW was founded by David Feldman in 2002 along with his two children, Michael and Sheril, who have owned and operated the company since 2009. DFW’s client-facing team will stay on with David Feldman Worldwide, a Veritext Company after the acquisition, ensuring that clients will receive the same stellar service they have come to expect. DFW is based in New York City and serves clients across the United States and in foreign locations.
“By joining with Veritext, we will be able to offer our clients a full breadth of technology solutions to make the deposition process more effective. They will also have access to the more than 50 Veritext offices around the country,” said Michael Feldman, President of David Feldman Worldwide, a Veritext Company. “Veritext shares our commitment to quality court reporting and impeccable service, which makes this transition the perfect fit for our clients and our employees.”
Veritext is the largest nationwide provider of deposition and litigation support solutions, providing court reporters, advanced technology and services to law firms and corporations across the United States. Veritext has been serving the legal community since 1997 and has extensive experience in all types of complex litigation. The company recently announced acquisitions in Florida and New Jersey and their expansion in the St. Louis marketplace. More information can be found at www.veritext.com.
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Jackim Woods & Co Advises School Health on Acquisition of Palos Sports
HANOVER PARK, IL – School Health Corporation announced today that it has acquired Palos Sports, Inc., based in Alsip, IL. For over 60 years Palos Sports has been a leading distributor of physical education supplies to school districts, park districts, and Special Olympics programs throughout the United States. Educators and recreational groups look to Palos Sports for innovative sports, recreation and physical fitness products and equipment, as well as for curricula and knowledge to make their programs more impactful and successful.
School Health is the leading national provider of health supplies, services and solutions, serving professionals in educational settings in the fields of Sports Medicine, Health Services, Special Education and Early Childhood. With over 20,000 physical education, recreation and athletic items in stock, Palos Sports’ products and customers complement School Health’s offerings.
“Together, School Health and Palos Sports will boast the nation’s largest offering of health and wellness products to the education market in the areas of Physical Education, Sports Medicine, Health Services, Special Education and Early Childhood,” said Rob Rogers, President, School Health Corporation. “We both seek to improve the health and well-being of students in schools across America. We are pleased that Palos Sports is now part of the School Health family.”
“Palos Sports is a perfect addition to our offerings given that physical education is playing an ever-important role in helping students maximize their learning potential,” said Scott Cormack, Executive Vice President of Business Development and Strategy, School Health Corporation.
School Health Corporation will maintain Palos Sports as a separate company which will continue to operate in Palos’ current facility, supported by Palos’ dedicated employees who will join the School Health organization. The company will operate under the name Palos Sports, a School Health company. Dan Dunne will continue as president of Palos Sports.
We are very excited to be a part of the School Health team,” said Dan Dunne, President, Palos Sports. “Our team is proud to be a part of School Health’s vison and commitment to the health, development and wellness of all students. Today we start an exciting journey together, combining our talents and knowledge with a great company.”
Rich Jackim, a managing partner at Jackim Woods & Company, advises School Health Corporation on its corporate development activities and arranged the transaction.
About School Health
Since its founding in 1957, School Health has been helping school-based health professionals keep students healthy both physically and mentally. As a national, full-service provider of health supplies and services it serves health professionals in educational settings from pre-school to college; collaborating with customers and advocating for the health of those entrusted in their care. School Health’s comprehensive offering includes health supplies, sports medicine equipment, early childhood products, and special needs aids. The company goes beyond merely supplying products by also providing product support, training, advisory services and exceptional customer care.
About Palos Sports
Palos Sports was founded in 1957. With 60 years of expertise in physical education, Palos Sports provides equipment and curriculum to schools nationwide. The company’s offerings are specifically designed to meet standards set by SHAPE America. The physical education and recreation equipment provider is known for its expert knowledge and individual attention provided to each physical educator, curriculum director, and sports director it serves.
About Jackim Woods & Company
Rich Jackim, Jackim Woods & Company, advises School Health Corporation on its corporate development activities and arranged the transaction. Jackim Woods & Company provides financial advisory services on mergers and acquisitions to clients nationwide.
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Jackim Woods & Co Advises on Acquisition of Computer Tutor Business & Technology Institute
Jackim Woods & Company is pleased to announce that it arranged the sale of Computer Tutor Business & Technology Institute to a private investor. Computer Tutor is a Title IV post-secondary institution that offers business and medical administration programs to students in Northern California.
Computer Tutor Business and Technical Institute is accredited by the Accrediting Commission of Career Schools and Colleges (ACCSC). It received the ACCSC School of Excellence Award. The buyer was a former school owner who had sold his very successful allied healthcare school in the Midwest to a private equity group in 2016.
Rich Jackim, a managing partner at Jackim Woods & Company represented both the seller and the buyer in arranging the transaction. Jackim Woods & Company represents buyers and sellers of Title IV post-secondary colleges and institutions nationwide.
Read MoreValterra Products Acquires Minder Research
Valterra Products announced that it h as acquired Minder Research, a supplier specializing in wireless tire pressure monitoring systems for recreational vehicles and automotive applications. Minder also offers temperature monitoring systems for Agricultural, Commercial and Residential markets. This transaction is further evidence that merger & acquisition activity is increasing up and down the RV industry supply chain.
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Camping World Acquires Jack Sisemore Traveland
Camping World Holdings announced its acquisition of Jack Sisemore Traveland in Amarillo, Texas. Camping World currently operates full-service SuperCenters in Anthony, Cleburne, Houston, Lubbock, Mesquite, San Antonio, Sherman, and Tyler, Texas and retail accessory stores in both Denton and Fort Worth. The Jack Sisemore Traveland acquisition further expands the market footprint, increasing Camping World’s current presence in the state of Texas to eleven locations.
Read MoreCamping World Acquires American RV
Camping World announced that it acquired American RV located in Grand Rapids, Michigan. Camping World currently operates a SuperCenter in Houghton Lake and retail accessory stores in both Belleville and Grand Rapids, MI. With the American RV acquisition, the Camping World Grand Rapids location will now convert into a full-service Camping World SuperCenter, further expanding the market footprint, and increasing Camping World’s current presence in the state of Michigan.
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LCI Acquires Italy-based Metallarte
LCI Industries announced that its wholly owned subsidiary, Lippert Components, has acquired Metallarte, a Siena, Italy-based manufacturer of entry and compartment doors, and its subsidiary, RV Doors, a Venice, Italy-based manufacturer of driver-side doors, for the European caravan (RV) market. Revenues of Metallarte in 2016 were approximately $12 million. LCI paid a reported $16.8 million in cash at closing, plus an earnout based on future sales.
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Malibu Boats, Inc. Acquires Cobalt Boats, LLC
Malibu Boats, Inc. (NASDAQ: MBUU) announced today that it has entered into a definitive agreement to acquire Cobalt Boats, LLC (“Cobalt”), a privately held, leading manufacturer and distributor of premium sterndrive and outboard boats for an aggregate purchase price of $130 million. For the last 12 months ended March 31, 2017, Cobalt generated approximately $140 million in net sales indicating a valuation metric equal to 93% of trailing 12-month revenue.
Founded in 1968, Cobalt is the market leader in the mid to large-sized sterndrive boat market and their recent expansion into the surf and outboard markets provides further opportunities for Cobalt to reach additional customers. Cobalt manufactures and sells water sport boats, cruisers, bowriders and outboard boats for cruising, skiing, entertainment, surfing, fishing and other recreational uses on lakes, rivers, intercoastal waterways and oceans. Cobalt is a world class brand with a product portfolio of twenty-four models across six proprietary, industry-leading series. Cobalt sells its boats through a well-established dealer network of 132 locations in the United States, Canada, and overseas.
The transaction makes a lot of sense for both companies. The acquisition combines two premium, best-in-class recreational boating brands, further strengthening Malibu’s leading position in the powerboat industry. Cobalt’s comprehensive portfolio of quality products also provides Malibu greater scale and a more balanced portfolio. Last, Cobalt’s complementary distribution network allows for more market opportunities across multiple segments within the recreational boating industry.
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