Every business felt the impact of COVID-19. Whether the pandemic hurt or helped a business, the entire economic ecosystem felt a seismic shift. And the mergers and acquisitions (M&A) space in Arizona was not spared.

“There are predominantly two different groups of buyers,” says Paul Valentine, a partner at Quarles & Brady. “You have your strategic buyers — other companies in the same industry looking to acquire other companies and grow — and then you have the private equity funds. The private equity funds really stopped M&A activity when the pandemic started. The reason for that is lenders became understandably nervous and so funding dried up.”

Because banks weren’t making loans for acquisitions, Valentine says there was a period of time after the pandemic hit when it was really difficult to get a deal done.

“But as we’ve gone on, Valentine says, “those lending restrictions have eased substantially and right now, we are right back where we were before the pandemic and interest rates are still really low.”


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One of the organizations that helps keep M&A activity on track in Arizona is the Association for Corporate Growth (ACG). Founded in 1954, ACG is the premier M&A dealmaking community with 59 chapters worldwide, including Arizona. ACG’s global network comprises more than 100,000 middle market professionals who invest, own and advise growing companies.

ACG helps its members overcome obstacles, many of which presented themselves during the pandemic.

“Simply meeting in person was one of the biggest initial challenges,” says Tyler Lounsbery, a principal at CliftonLarsonAllen. “It’s hard for investors to get comfortable spending millions of dollars without the opportunity to physically visit a location and look management in the eye. Many areas of due diligence were somewhat easily transitioned to be completed 100 percent remote, but most buyers still want to develop a level of relationship and comfort that can’t be replicated through Zoom calls.”

John Farr, managing director of Columbia West Capital, says another key component of dealmaking that was thrown off by the pandemic was what those in the industry call LTM (last twelve months) cash flow, knowing that even companies with highly successful growth rates still dipped for some period.

“Frankly there are winners and losers,” Farr says. “We’ve had some clients who did have transactions that were put on hold. And then we had some clients who have out-performed over the last 12 months and that has created some motivation for them to sell.”

The pandemic has also created motivation in the M&A space to make up for lost time.

“What we have is sort of this pent up demand because these private equity firms feel they’ve lost at least a quarter, maybe even two of acquisition activity,” Valentine says. “And they don’t get paid unless they utilize their capital. So there’s even more demand. So when companies are going to market, you’re seeing not just one or two offers, you’re seeing four, five, six, seven offers. And they’re all competing against each other to try and acquire these businesses.”

So in Arizona, the air isn’t the only thing heating up heading into summer.

“We increasingly have a more diversified economy, and we also have a community that is business friendly,” Farr says, “so Arizona will continue to be a gem for any business dependent on growth, especially population growth. When you hear that, you may naturally think housing. Yes, that’s true, but I also mean any service business, any consumer business, anything driven by unit volume of a population. And that’s a great characteristic to have in a state.”

Farr also points to Arizona’s growing technology sector, which is expected to continue to foster and attract M&A activity, as well as capital raising.

For those looking to make deals as we emerge from the pandemic, M&A activity is expected to be very strong moving forward in 2021, especially in the middle market.  There are two basic drivers, contributing to the hot M&A space, according to Lounsbery:

• Dry powder: “Private equity continues to gain popularity as an asset class, and strategic acquirers have cash on their balance sheets,” Lounsbery says. “In simple terms, there continues to be a ton of cash chasing deals.”

• Owner demographics: “As the baby boomers continue to age and businesses aren’t transitioned to a family member, there will be many businesses that have no other option than going to market,” Lounsbery says. “Private equity and other acquires are great options for these sellers.”

“I think the notion of optimism in this moment is very real,” Farr says. “A lot of people are busy and 2021 particularly could be a very good year for M&A.”