Companies around the globe agreed to merge last year at a breakneck pace, swelling the volume and mergers and acquisitions announced in 2015 to an all-time high.
According to global deal tracking firm Dealogic, global M&A volume jumped 33 percent last year compared with 2014 to reach an record of nearly $4.9 trillion — surpassing the previous high of $4.6 trillion set in 2007 before the Great Recession hit.
The urge to merge last year in Chattanooga brought new and bigger owners for the region's four biggest independent banks as well as for the Chattanooga's biggest grocery chain and largest accounting firm. Last year, Chattanooga also attracted the biggest venture capital investment in decades in one of its growing number of business startups. The owners of smaller businesses, often owned by aging Baby Boomers eager to cash in on their lifetime of work, also have fueled an increase in sales and deals involving companies across a host of industries.
Andy Stockett, managing partner for Four Bridges Capital which helped arrange many such sales, said historically low interest rates and improving economic conditions have made it an attractive market to sell some or all of many businesses.
Investors wanting better returns than in the public markets have also created a wealth of new venture capital and private equity funds looking to invest or purchase growing companies.
"There's a lot of cash in equity funds looking for investments and interest rates are still near historic lows so there has certainly been a robust M&A market," Stockett said. "We had one of our best years ever in 2015 and it looks like there are still a lot of good deals and activity heading into the new year."
But with historically high valuations of many businesses and the Federal Reserve Board promising higher interest rates in the new year, some deal making could slow down by the end of 2016, Stockett said.
Nonetheless, tougher times in some industries has brought more consolidation, and changing markets are likely to heighten business interests in different types of companies.
Food City, the Abington, Va.-based grocery chain that has been trying to expand into Southeast Tennessee for years, got its chance when the parent company of Bi-Lo, Winn-Dixie, decided to exit some of its outlying and struggling markets.
Similarly in the Dalton, Ga.-based carpet industry, two industry giants are merging as carpet loses market share to hard floor surfaces.
But most of the deals of 2015 involve larger businesses looking to expand and capture the growth of those they acquire. Automotive suppliers Gestamp and Yanfeng USA are building new plants to supply Volkswagen. Last week, Bellhops announced it has secured $13.5 million of equity from a second round of venture capital raised from top investment firms across the country.
Tennessee, which attracted a record $268 million of venture capital in 2014, is likely to report similar numbers for 2015 once all the data is collected, LaunchTN Director Charlie Brock said.
"The fact we are likely to match last year's record investment level is a huge testament that we're seeing more quality startups across the state and Tennessee is getting more attention and connections with investors across the country," Brock said. "Certainly Chattanooga and Nashville are getting more of that attention."
In a year of consolidation and deal making, the top business sales and mergers in Chattanooga included:
Food City takes over local Bi-Lo stores
Food City, the operator of 104 supermarkets in Tennessee, Virginia and Kentucky, purchased 29 Chattanooga-area Bi-Lo stores. Steven C. Smith, chief executive of Food City parent K-VA-T Food Stores Inc., said the company would invest $40 million to $50 million over three to five years "in the stores, in the people, in the product, and probably equally as important, in the price the consumers will see." Food City has added hundreds of new workers at the former Bi-Lo stores, swelling its employment in the market to more than 2,000 full- and part-time workers.
Chattanooga's independent banks merge with bigger regionals
Chattanooga bankers used to helping other businesses make investments and deals were busy in 2015 making their own deals with larger regional players in the industry. First Security Group, the parent of FSG Bank, combined with Atlantic Capital Bancshares in Atlanta. Cornerstone Bank merged with the Knoxville-based SmartBank and will soon take on the Smart Bank name. CapitalMark Bank, the state's fastest growing startup bank formed only eight years ago, was acquired by Pinnacle Bank in Nashville. First Bank, based in Lexington, Tenn., acquired Northwest Georgia Bank in Ringgold, Ga.
Elliott Davis merges with Decosimo accounting firm
Forty-four years after three local accountants started Joseph Decosimo and Co., Chattanooga's biggest accounting firm merged in 2015 with the Greenville, S.C.-based Elliott Davis to create the fifth biggest accounting firm in the Southeast, known as Elliott Davis Decosimo. The combined firm has more than 800 employees working out of 17 offices. and in November agreed to add the Franklin, Tenn.-based Crowell & Crowell accounting firm.
Engineered Floors merges with J&J Industries
Bob Shaw-led Engineered Floors announced in December that will merge with Dalton-based family carpet maker J&J Industries. The combined company, under the chairmanship of Shaw, will be the third-largest flooring manufacturer in the U.S. with projected revenues of $625 million, according to Floor Focus magazine figures. Shaw started Engineered Floors five years ago after years at the helm of Shaw Industries. J&J Industries has been under the leadership of the Jolly family for decades. Engineered Floors operates three high-tech facilities in Northwest Georgia, and J&J Flooring operates a 950,000-square-foot facility in Dalton. The deal is expected to close in late February.
Mohawk Industries adds to floorcovering empire
The world's largest flooring manufacturer expanded its global presence and hold in 2015, with acquisitions of Belgium-based luxury vinyl tile maker IVC Group ($1.2 billion) and Bulgaria-based ceramic tile maker KAI Group ($208.75 million). Upgrades to its European ceramic tile manufacturing allowed Mohawk to roll out new products like 3-D wall tiles and hexagon visuals. Jeff Lorberbaum, chairman and CEO of Mohawk, said the company is already importing products from its two new European facilities to meet domestic demand.
UPS buys Coyote Logistics
UPS bought Coyote Logistics for $1.8 billion to grab a piece of the burgeoning freight brokerage business. Coyote, which acquired the Chattanooga-based Access America in April 2014, has major operations in Warehouse Row downtown. Coyote had helped support UPS in the past during the busy holiday season.
Auto suppliers expand in Chattanooga
With Volkswagen gearing up to start building a sports utility vehicle by the end of this year, automotive suppliers are expanding in Chattanooga to supply VW's new vehicle line. Spanish auto supplier Gestamp in investing another $180 million and adding nearly 600 more workers in Chattanooga to expand its existing plant and build another. Chinese supplier Yanfeng Automotive Interiors is making a $55 million investment in a new manufacturing operation that will add 325 jobs. Ooltewah-based RemSource- USA Inc. unveiled plans last year to hire 89 more workers, more than doubling its staff through a $4 million addition.
Bellhops is on the move with more equity
Bellhops, the on-demand moving service started only four years ago by a pair of Auburn University graduates, secured a second round of venture capital funding in December to help grow and upgrade what is already the nation's biggest moving company of its type. The company got initial funding three years ago from Lamp Post Group, $6 million more in 2014 from Binary Capital and $13.5 million last month from an investment group organized by Canaan Partners from Connecticut. The venture capital funding was the biggest for any Chattanooga company in more than two decades.
Staff reporters Mike Pare and Alex Green, and the Associated Press, contributed to this report.
Contact Dave Flessner at firstname.lastname@example.org or at 757-6340.