Upstate New York became wildly attractive to many city dwellers during the pandemic, including those working in private equity. As a result, throngs of city residents headed for the Catskills and the Adirondacks to wait out the pandemic.
In turn, real estate prices around Albany and in the Hudson Valley have increased dramatically. Whether new owners are looking for a permanent place to live or a new investment property, the market has become more competitive.
While the pandemic has hurt businesses across the country, the economic environment in upstate New York is on relatively stable ground. Around one-third of CEOs in the region expect revenues to increase during this year, according to data from the Siena College Research Institute. Considering how damaging Covid-19 was to the economy last year, the optimism is palpable.
For investors who may have relocated upstate, the area is brimming with opportunities.
While the pickings may seem slim compared to the city's, upstate can be bountiful for both the buy and sell sides. Upstate is rife with successful small, family-owned businesses in and around its cities.
In addition, talent is pouring into the area’s workforce from several local colleges and universities. Siena, the State University of New York at Albany, the College of St. Rose, Rensselaer Polytechnic Institute and Cornell are pumping talented young workers into local economies. While some venture off to the big city, others contribute to a cohort of successful small businesses upstate.
But for many of the private businesses in the region, there is a need to consider plans for succession or liquidation, depending on their goals. While it’s more common in cities such as New York or San Francisco to build a company with the purpose of growing it into an acquisition target, other businesses—“lifestyle” businesses—are instead built to service local economies and to supply owners with income.
They’re not growing as fast as possible with the intention of having an initial public offer, but that doesn’t mean that some of these companies can’t be prime targets for investors, especially when their owners may not have given much consideration to either retiring or moving on from their companies or both.
Upstate also could prove to be lucrative for buy-side opportunities.
Small and medium-size businesses abound in popular sectors that funds typically covet, such as health technology, health care and hospitals and consumer goods.
Companies already have been set upon in the past several years. Last year Insight Partners acquired a majority stake in Albany-based CommerceHub, valuing it at $1.9 billion. Similarly, Waterford-based Momentive Performance Materials was acquired for $3 billion by a partnership in 2019.
Deals are already getting done. During the first quarter of this year, 35 transactions were completed in both the Hudson Valley and the Capital Region.
For investors, the pandemic may have changed the perception about uprooting and relocating upstate. Life might be slower outside of Manhattan, but that can be a good thing for professionals ready for a change.
Before the pandemic, areas such as the Capital Region and the Hudson Valley may not have made the top of many funds’ lists. But many private-equity funds have been active in the region for years, and it may be worthwhile for others to consider the upside of upstate.