Recession fears drive down business valuations


The merger between Chemical Bank and TCF Bank will result in a name change to TCF sometime in 2020. Courtesy TCF Bank 

The next recession isn’t here yet, but business advisers say a looming slowdown already is driving down business valuations in the U.S. mergers and acquisitions (M&A) market.

Over half (53%) of business brokers recently surveyed say a recession is the biggest concern, especially for small businesses, according to the Q3 2019 Market Pulse Report published last month by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project.

The report — which shares the latest data available with the next quarterly summary expected to be published in January or February — shows nerves are taut heading into the new year.

“The market doesn’t like uncertainty, particularly on Main Street,” said Craig Everett, director of the Pepperdine Private Capital Markets Project at the Pepperdine Graziadio Business School. “Small business owners are worried that a recession is coming, and trade issues are causing volatility. All that nervous energy means buyers are dialing back a bit — particularly on smaller market deals.”

Uncertainty over the upcoming presidential election is less impactful than a looming recession, the report found, with 20% of business advisers saying the election next year is impacting the M&A market. 

The trade wars with China are having a smaller impact on small businesses with 11% of advisers saying they will impact the Main Street M&A market and 27% saying they will impact the overall market.

Even though small business owners continue to provide seller financing as part of the purchase price (about 10% to 15%), they generally are receiving more cash at close than a year ago. The biggest jump was for businesses valued between $1 million and $2 million, as 93% of the purchase price was realized at the close of the sale in Q3 2019, compared to 80% of the purchase price in Q3 2018.

“Lenders always like to see sellers keep some skin in the game,” said Justin Sandridge, of Murphy Business Sales-Baltimore East. “When sellers aren’t willing to finance any of the purchase price, that sends warning signals to buyers and lenders alike. Refusing to provide seller financing is like holding up a giant ‘no confidence’ sign, and it’s likely to scare other parties away from the deal.”

At the local level, if the number of buy- and sell-side deals closed in 2019 is any predictor of the strength of the M&A market for 2020, things will be all right.

The following are a selection of the M&A deals closed in several West Michigan industries that the Business Journal reported on in 2019:


Chemical Bank and TCF Bank on Aug. 1 closed an all-stock “merger of equals” to create a $45 billion bank headquartered in Detroit with 526 branches in eight states. The Chemical Bank brand will continue in the market until mid-2020 when its banking centers will be re-branded as TCF Bank.

Sparta-based ChoiceOne Bank and Lapeer-based County Bank Corp., parent of Lakestone Bank & Trust, closed a merger in September combining the two entities under the name ChoiceOne Financial Services, which is now a bank holding company with about $1.3 billion in assets and 28 offices in southeastern and West Michigan.

Cascade Township-based Hungerford Nichols CPAs + Advisors acquired Muskegon-based Conn Geneva & Robinson CPA and Consultants and Spring Lake-based Kimberly Taylor Accounting & Tax, according to a report in November. Hungerford now has offices in Cascade Township, Greenville, St. Joseph and Muskegon.


Meritage Hospitality Group acquired 20 Wendy’s locations across Georgia and Texas.

Founders Brewing Co. handed over majority ownership to Madrid-based Mahou San Miguel Group, which now owns 90% of Founders, with Mike Stevens and Dave Engbers owning the remaining 5% stakes, respectively.

Business services

Caledonia’s Acrisure insurance brokerage acquired 113 agencies in 2019, up from 102 in 2018.

Greatland Corporation, a Walker-based provider of wage and income tax reporting information, products and services, in October acquired Bridgewater Township, New Jersey-based JAT Software.

Grand Rapids-based NPAworldwide, a global network of independent recruiting firms, purchased Menasha, Wisconsin-based Inter-City Personnel Associates, a similar company, effective Sept. 3. The deal brought more than 60 new member recruitment agencies into NPAworldwide’s fold.


Boston-based Audax Private Equity acquired Caledonia-based Aspen Surgical from Chicago-based Hillrom for $170 million.

In October, Zeeland-based Herman Miller acquired the remaining shares of Harrogate, England-based naughtone for about $46.1 million and also spent $78 million to acquire an additional 34% equity interest in HAY, following Herman Miller’s acquisition of a 33% equity interest in HAY in 2018.

Holland-based Motus Integrated Technologies in August signed an agreement to acquire Southfield-based Janesville Fiber Solutions, a division of Milwaukee-based Jason Industries Inc., for about $85 million.

Universal Forest Products in February acquired a $5 million company (Grand Rapids-based Wolverine Wood Products) and in August bought a $14 million company (Northwest Painting, various locations). An affiliate of Universal Forest also bought Hartford, Wisconsin-based Pallet USA in September.

Itasca, Illinois-based Fellowes Brands acquired Holland-based Trendway Corporation, the companies said in August.

Medical/health care

Kalamazoo-based Stryker in November acquired Tennessee-based Wright Medical Group for a total enterprise value of about $5.4 billion; in September, acquired Mobius Imaging and its sister company, GYS Tech, dba Cardan Robotics, for a total of $500 million; and acquired Caesarea, Israel-based OrthoSpace Ltd. in an all-cash transaction for an upfront payment of $110 million and future milestone payments of up to an additional $110 million in March.

Dublin-based Perrigo — which has its North American headquarters in Allegan — bought Grand Rapids-based Ranir for $750 million in the third quarter of 2019.

Caledonia-based Aspen Surgical acquired Redmond, Washington-based Beatty Marketing & Sales, an orthopedic disposables supplier, on Dec. 16.

Grand Rapids-based Priority Health, part of Spectrum Health, purchased Southfield-based CAM Administrative Services, effective July 1. Terms were not disclosed.


Revue magazine was purchased by Serendipty Media LLC in September.

Kentucky-based Paxton Media Group in June bought the Grand Haven Tribune from Ohio-based Sandusky Newspaper Group.

Rick Burrough, owner of Lapeer-based View Newspaper Group, in July acquired The Daily News in Greenville from siblings Rob Stafford and Julie Stafford, and his Lapeer-based company Michigan Web Press at the same time acquired Stafford Printing in Greenville from the Stafford siblings.


San Francisco-based GrubMarket in December acquired Grand Rapids-based Doorganics, a farm-to-table grocery and specialty grocery products delivery company.

Denver-based GrowGeneration Corp. acquired Grand Rapids Hydroponics in September.

Former vice chair for Amway Bill Payne and his son, Will Payne, in August purchased MarxModa dealerships in Grand Rapids, Kalamazoo and Traverse City from seller Joe Marx.


New York-based Harvest Partners acquired Grand Rapids-based Service Express from Pamlico Capital in December.

Grand Rapids-based Tech Defenders in June acquired Device Renew, an IT asset disposition (ITAD) company in Bowling Green, Ohio.

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