As the country slowly gets back on track after the pandemic, dealmakers are assessing the regions they like most for where M&A could pick up. Their top choice? The Southeast.

“When you talk about right to work, lack of unions, and taxes, the Southeast is just a super friendly place to establish businesses in the U.S. right now,” says Chris Parisi, a partner at New York-based investment bank Carl Marks Advisors. “Business owners recognize the opportunity in the Southeast. There is labor alongside a friendlier regulatory and tax environment. Businesses are naturally going to migrate to the places where they can be successful.”

Build it and They Will Come

A lot of foreign companies are building manufacturing plants in the Southeast, including in Alabama, South Carolina and Tennessee. With the growth of electric vehicles, there are a lot of auto plants being built, says Parisi. Electric vehicle manufacturer Polestar, a subsidiary of Volvo, recently built a new manufacturing plant in South Carolina. “There’s a huge move towards reshoring the industrial complex,” mentions Parisi. “We’re seeing a lot of manufacturing deals.

“You go down to these counties in the Southeast and see there is labor available and it’s not at $50 an hour,” Parisi says. “Also, workers mentality here is not a lot of job hopping from one to the next. There’s a little bit of more loyalty to the businesses. It’s just a more stable environment.”

Carl Marks recently advised Roane Metals Group, a metals recycling company, on its sale to Commercial Metals Company (NYSE: CMC). Roane has the capacity to process about 85,000 tons of ferrous and non-ferrous materials annually at its two facilities located in Tennessee. Parisi worked directly on that deal.

Ethnic Flavors

States like Florida have seen a surge in population growth going back to the pandemic, due in part to lower taxes and great weather. The increase in people moving down South has also brought something else to the table: diversity, which not surprisingly has given rise to ethnic food companies.

Last year, food supplier GrubMarket acquired Miami-based Vega Produce, one of the largest providers of Asian fruits and vegetables in the U.S., to strengthen its presence in Florida. Vega distributes snow peas, sugar snap peas, dragon fruits, and papaya, among other items.

“As people with a wider range of backgrounds and lifestyles flock to the region, food companies will continue to experience growing demand across many different categories,” says Harris Williams managing director Tim Alexander, who is based out of the company’s Minneapolis office. “For food companies and distributors, there’s substantial runway for growth in Florida and the Southeast, and M&A will play a key role for many as they seek to build scale. These are very localized markets, so acquiring regional leaders is a great way to tap into the area’s growth. Private equity will be active as well, as investors favor great companies in growth markets.”

Connect to Southeast dealmakers:
Parisi: [email protected]
Alexander:  [email protected]