This article was originally published on timesfreepress.com.
The pace of deal making in 2016 slowed from the record high of the previous year, but merger and acquisition activity remained active in the Chattanooga region this year, both in growing and shrinking industries.
With Chattanooga’s improving economy and rental market, real estate investors bought more than $250 million of apartment complexes during 2016. Outside investors also acquired one of Chattanooga’s biggest family-owned businesses — Republic Parking Systems — and several major commercial properties, including Two North Shore, Warehouse Row and the Overlook at Hamilton Place.
Overall real estate sales are expected to reach an all-time high in Chattanooga in 2016 once all of the sales are tallied for the year. Through the first 11 months of 2016, the number of homes sold by Realtors jumped by 10 percent over last year to a record high of 8,850 homes, according to the Greater Chattanooga Association of Realtors.
While the improving economy spurred many sales, consolidation in other industries facing economic and competitive challenges also bought new owners to major local businesses, including Alstom, Roper and J&J Industries in the power equipment, appliance and carpet industries.
The Tennessee Valley Authority also decided this year to abandon its unfinished Bellefonte Nuclear Power Plant after four decades of contruction starts and stops. Former Chattanooga developer Franklin L. Haney, who tried unsuccessfully for the past decade to negoiate a partnership or purchase of the nuclear plant with TVA, won the bidding for Bellefonte by offering $111 million for the facility. That was only about 2 cents return for every dollar TVA invested in the plant, but Haney said he hopes to revive the facility and bring jobs back to Jackson County, Ala., by finishing the plant.
Nationwide, the analytics firm Dealogic said there were fewer blockbuster mergers in 2016 than last year. The value of the average merger or acquisition announced in 2016 was around $104.2 million, down from $115.4 million in the previous year.
A record number of deals also were withdrawn this year across the country, including $606.4 billion worth of deals in just the first half of 2016, Dealogic said. Both of the presidential candidates also voiced concerns about consolidations, including the proposed $85.4 billion merger of AT&T and Time Warner, which still faces an uncertain future.
GF Data Resources, which tracks private equity-sponsored transactions in the $10 million to $250 million value range, also counted fewer deals in the first three quarters of 2016, dropping from 167 deals last year to 148 deals in the same period this year.
Stronger local market
But the number of deals remains near the historic highs of 2015 and those negotiating mergers and acquisitions in Chattanooga insist the local market remains strong.
“Nationally, activity may have slowed down some, but what we see on a smaller market scale here in Chattanooga is a lot of business owners really scratching their heads thinking about the future and what a transition to new ownership might look like for them,” said Andrew Kean, one of the partners in Alderman Holdings, a Chattanooga investment firm that bought into Southeastern Tool & Die and Majestic Stone this year. “So it’s been a pretty robust market regionally and we think there are some great businesses here in Chattanooga to do even more next year.”
With interest rates still near their historic lows and an improving economy boosting the sales and profits of many buisneses, investors remain eager to invest in private businesses, experts say.
“There is still a lot of cash on the sidelines and a lot of private equity firms looking for opportunities to invest at the same time we see an aging population having a lot of Baby Boomer business owners looking to sell and retire,” said Andy Stockett, managing partner for the Chattanooga-based Four Bridges Capital. “There may have been some hesitation around the presidential election until that was decided, but I think everything now is pointing to another good year in 2017.”