Chattanooga's biggest truck carrier and medical hospital both got new owners last year in what turned out to be a busy year for mergers and acquisitions in Chattanooga despite growing borrowing costs and fears of a recession.
Frank Williamson, the founder and CEO of Oaklyn Consulting in Chattanooga, said 2023 was an active year for business sales, and he expects the new year could be even busier for such deals.
Higher interest rates may have trimmed the purchase price for some deals dependant upon borrowed monies, but Williamson said the hike in interest rates through much of last year "did not slow the market down" and fears of an economic downturn have yet to materialize.
"The economy remained strong, and good companies fared well," Williamson said in a telephone interview. "People are still moving into Tennessee, and the economy here is still doing well. We've got some ambitious management teams at some of the growing companies, and we've got more investors than we've had before."
Andy Stockett, the managing director at Four Bridges Capital Advisors in Chattanooga, said the large megadeals slowed last year because of finance concerns as interest rates rose and the sale of many traditional businesses were stalled or at least delayed by higher borrowing costs.
But rapidly growing companies were still able to secure outside capital or purchasers over the past year, Stockett said.
"If you have a class A business, you are still getting a lot of attention," he said. "We think 2024 is shaping up as a solid year for middle market mergers and acquisitions based on the pent up demand for acquiring businesses and continued baby boomer aging demographics pushing more business owners towards exiting."
(READ MORE: Chattanooga-area business openings and closings in December 2023)
The net worth of global private equity firms soared in 2023 to a record high $2.59 trillion, up 8% from a year earlier, according top S&P Global Market Intelligence and Pregin data.
But for all the interest by equity firms in buying and growing companies, most of the biggest business sales in Chattanooga last year involved mergers with other companies in the same industry or, in the case of Erlanger Health, restructuring the hospital's ownership.
In the biggest local deal of the year, Phoenix-based Knight Swift Transportation acquired the Chattanooga-based U.S. Xpress Enterprises for $808 million. U.S. Xpress, which grew from its start in 1986 to become a $2.2 billion-a-year truck carrier, completed its sale to Knight Swift in July. U.S. Xpress remains a subsidiary with its own name, at least for now. But Eric Fuller, the son of company founder Max Fuller, resigned as CEO and was replaced by Tim Harrington.
The biggest bank in Rhea County, Simply Bank, also merged with a bigger bank last year with the $73.6 million sale to First Financial Bank, headquartered in Terre Haute, Indiana. Simply Bank was owned by Bernice Calfee Sale, the widow of the late George Calfee, bought the former Community National Bank, the former First Bank of Rhea County and former Rossville Bank in the 1980s to create Simply Bank.
Another proposed bank purchase was scrapped last year, however. The Toronto-based TD Bank called off its plans to buy Tennessee's biggest bank, First Horizon, keeping Chattanooga's biggest bank as a Tennessee-based institution.
Chattanooga's biggest business deals
In 2023, nine Chattanooga businesses changed owners through multimillion-dollar acquisitions, mergers and reorganizations, and at least as many other Chattanooga companies acquired other major businesses in the past year. Among the biggest business deals for Chattanooga companies in 2023 were:
— Knight Swift buys U.S. Xpress for $808 million.
— Erlanger Health System converts to a private nonprofit business.
— Covenant Logistics buys Lew Thompson & Sons poultry shippers for $100 million, plus up to $30 million over three years.
— First Financial Bank announced plans to buy Simply Bank for $73.6 million.
— Stock'd Supply was sold to BlackHawk Industrial, a distributor of metalworking and other industrial products.
— eDynamic buys Leaning Blade from Thinking Media.
— Craig Fuller's Flying Media Group buys AVBuyer and Bonner.
— Five Star Five Breaktime Solutions acquires three other Canteen franchises.
— Micronics Engineered Filtration Group buys FLSmith and SOLAFT Filtration Solutions.
— Market Street Partners merges with Smith and Howard.
— Miller Industries Inc. buys Southern Hydraulic Cylinder Inc. for $17.5 million.
— Legacy Dental buys Chattanooga Family Dentistry.
— Astec Industries acquires Minds Automation Group Inc.
— Reliance Partners buys Truck Team Insurance after being recapitalized in 2022 by Carousel Capital.
— Playcore buys Victor Stanley.
— Unum buys Cigna's UK dental insurance business.
— Novatech acquired ACT Business Machines.
Source: Newspaper archives, company reports for list prepared by Oaklyn Consulting
One of Hamilton County's biggest employers also got a new owner in 2023 as Erlanger Health converted from a government-owned hospital to a private, nonprofit hospital. The change in the ownership structure for Chattanooga's biggest hospital is similar to what other former government-owned hospitals in Atlanta, Memphis and Knoxville have done, and backers said the change gives Erlanger more flexibility for the future while retaining its role as the primary tertiary care and safety-net hospital in the region.
"This is a recognition that for Erlanger to be sustainable for generations to come, we had to do something about its structure, and I think this new nonprofit status will help the hospital and our mission going forward," Erlanger Chair Sheila Boyington said in a telephone interview. "This gives us more flexibility to partner with other organizations, including our new joint venture with HCA in East Brainerd."
Erlanger previously received $1.1 million of year in financial support from Hamilton County, which previously owned and appointed some of the directors for Erlanger. But Boyington said as a private, nonprofit, Erlanger is able to more than make up for that loss with new fundraising capabilities, partnerships and other ventures that Boyington were harder to do as a government hospital.
Most of the deals in 2023 involved business sales to other companies or private equity groups. But one Chattanooga-based company, Environmental Solutions Group, became part of a publicly traded company through a reverse merger with Genesis Unicorn Capital in August.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.