The Bonadio Group Investment Banking Team Year in Review

Happy New Year from the Bonadio Group’s Investment Banking team. Thank you for helping to make 2023 another successful year!

As we look back on 2023, two words come to mind: Growth and Excellence. Our team proudly eclipsed another significant deal-making milestone in 2023, surpassing $900 million in closed sell-side transactions over the last 10 years.

During 2023, we assisted middle-market business owners achieve successful exits in various industries, including manufacturing, distribution, healthcare, financial services, and equipment engineering.

We are excited to turn the page to 2024, with two pending transactions that are expected to close in Q1 and another that we’re expecting to take to market in Q1.

2023 Deal Spotlight

Blading Services Unlimited, LLC (below)

Blading Services Unlimited, LLC (“the Company”) is a leading supplier of high-quality blades for steam and gas turbines in various models of rotating machinery. Located in Canastota, NY, the Company has a premier reputation and deep-rooted relationships with customers in the military, steel, refining, and power generation industries.

Our investment banking team assisted the owners of the Company with a successful exit. In December 2023, the Company sold to Rotating Machinery Services (“RMS”). Headquartered in Bethlehem, PA, RMS is a leading provider of specialty aftermarket repair, maintenance, and overhaul services for large, highly engineered rotating machinery.

This transaction was a “win-win” for both parties, and management of the combined companies are excited about the future.

New Team Members

Brenden Howell joined our Investment Banking team as an Analyst in August 2023. Brenden graduated from Hobart College in May 2023 with a BA in Economics. While at Hobart, Brenden was a student-athlete and teammate on the 2023 National Champion Ice Hockey Team. Prior to joining Bonadio, Brenden completed an internship at Manning & Napier, working as an investment analyst. We are thrilled to welcome Brenden to our team.

Market Review & Outlook (above)

Merger and acquisition activity in the US Middle-Market declined in 2023. The main drivers for the downward deal volume in 2023 were rising interest rates, inflation, macroeconomic challenges, and national geo-political conflicts.

As shown in the table below (per Pitchbook), estimated deal value declined by 29.5% to $645.3 billion, its lowest point since 2017 outside of the pandemic-induced lockdown of 2020. Deal count also declined by 7.3% to 8,115.

Looking ahead to 2024, middle-market deal activity moves onward, despite the macroeconomic challenges it’s currently facing. There continues to be near-record high levels of dry powder on hand amongst private equity firms. As such, these firms are hungry to do deals. Additionally, corporate (strategic) buyers continue to have an interest in the M&A markets given their opportunities for synergies and expanded capabilities. Buyers with an appetite to get deals done, paired with the continued aging population of business owners in the middle market, are keeping the market competitive and holding multiples relatively steady.

The Federal Reserve in December held interest rates steady at a 22-year high amid signs that inflation has cooled and is penciling in three potential rate cuts during 2024. Interest-rate cuts, and more clarity on where the economy is heading, may help deal makers find common ground again, particularly those looking to put capital to work.

In Closing

Even though the number of transactions and average deal multiples declined in 2023, we continue to see strength in the lower middle market where we focus. We had no trouble finding multiple interested buyers with attractive valuations for the transactions we represented in 2023. We believe that the pressures faced by the middle market, in general, caused a “flight to quality” on the part of potential buyers, and we believe the market for strong businesses in the lower middle market is still robust. As such, we remain bullish about middle-market M&A going into 2024.

Thank you again for making 2023 another successful year! Best wishes for a prosperous 2024, and we look forward to working together.

About Us

The Bonadio Group is a nationally ranked top 50 CPA firm founded in 1978. With over 1,000 professionals across 9 offices, we are a full-service accounting, tax, and consulting firm.

Bonadio’s Investment Banking team specializes in sell-side investment banking transactions to help business owners exit their businesses. We generally serve companies with $2 million to $10 million in annual EBITDA (which typically equates to enterprise values from $10 million to over $100 million). We also perform “go-to-market assessments”, designed to help business owners understand how potential buyers will view their business before deciding to go to market.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.