Small-cap companies have historically been known for the “urge to merge” in one of two scenarios: the first is when a larger company buys a smaller one; the second occurs when a small-cap company is an acquisition target for private equity or other strategic buyers. In the first case, we would see a larger company in a similar or complementary industry buying a small-cap business or a merger of two comparatively sized companies joining together.

These transactions created a benevolent dynamic known as the “takeout premium” because many small cap companies, like those we look for in several of our Strategies, are high quality, well managed businesses. Prior to small-cap’s resurgent leadership, the fact that these companies were typically selling at prices that did not reflect their high-quality attributes made them ideal targets for savvy long-term investors.

This pattern, however, has been reversing itself over the last two-plus years. There has been a marked “pendulum swing,” in which a cohort of small-companies have shifted from being potential take-private targets to acquiring businesses at attractive prices from private equity firms that need liquidity. 

These transactions have become so prevalent that we have published three different pieces since May 2025 that have looked at how small-cap “Quality Compounders” in Royce Premier Fund, far from being targets for larger enterprises or for private equity firms making take-private transactions, were buying businesses at what we thought were attractively low prices—usually from private equity firms. (We define “Quality Compounders” as mature small-cap businesses that boast strong balance sheets as well as what we think are unique business models that also boast high returns on capital and lofty reinvestment rates.) So, while the “urge to merge” remains strong, it has been encompassing more than the usual situation in which a smaller company is bought by a mid- or large-cap enterprise.

Ten companies that we hold have made a total of 17 acquisitions over the last three years, most from private equity sellers that were offering companies at what we thought were attractive valuations to our Quality Compounders:

Headquartered in Toronto, Colliers International Group is a global diversified professional services and investment management company that operates through three businesses: Commercial Real Estate, Engineering, and Investment Management. The company has been active as an acquirer from private equity players over the last few years.

• Colliers bought Englobe from ONCAP, the mid-market private equity platform of Onex, for $475 million in June of 2024. Englobe provides consulting and technical services related to infrastructure, buildings, and environmental projects.
• Colliers next acquired Triovest, a leading Canadian commercial real estate services platform, from Coril Holdings in April of 2025.
• In February 2026, Colliers announced a definitive agreement to acquire Ayesa Engineering for approximately $700 million in cash. The deal provides an exit for A&M Capital Europe, a London-based private equity firm that held a 67% stake in Ayesa, and the Manzanares family. The deal expands Colliers’s engineering platform to nearly 14,000 professionals across 23 countries. Equally important from our perspective, the transaction underscores the role of public companies like Colliers as natural partners that can offer stability and long-term growth for firms looking to move beyond the private equity ownership model.

EnPro is an industrial technology company that makes highly engineered components and provides specialized services for mission-critical applications. Its products are generally small relative to the equipment they go into, but failure can be costly—making reliability, materials expertise, and qualification important competitive advantages.

• In November of 2025, EnPro acquired AlpHa Measurement Solutions, a Houston-based company that makes liquid analytical sensors and instrumentation used to measure parameters such as pH and conductivity. The transaction fits EnPro’s strategy of getting into industrial-technology niches where the products are specialty engineered, critical to the customer’s process, and supported by attractive aftermarket and/or recurring demand. EnPro specifically targets companies with secular growth, high aftermarket exposure, generous EBITDA margins (above 20%), and asset-light/high-cash-flow characteristics. AlpHa had been owned by Prairie Capital, a Chicago-based PE firm.

ESAB Corporation manufactures connected fabrication technology and gas control solutions, providing gas control equipment, robotics, and digital solutions for fabrication, industrial, life sciences, and medical applications.

• In August of 2025, ESAB bought EWM, a Germany-based leader in heavy industrial welding equipment and advanced automation, for roughly €275 million from EWM’s two shareholders: Armira, a Munich-based private investment holding company, and EWM’s founding family, the Szczesnys, which had retained an ownership stake alongside Armira.
• In early February 2026, ESAB announced the acquisition of Eddyfi Technologies, a global leader in advanced inspection and monitoring technologies, for $1.45 billion. The move expands ESAB’s total addressable market by approximately $5 billion and looks to is like a transformative step in ESAB’s evolution as a premier industrial compounder while also allowing private equity firm Novacap and the institutional investor Caisse de dépôt et placement du Québec to realize a major liquidity event following their strategic realignment of the asset.

ESCO Technologies is an industrial technology company that makes highly engineered, mission-critical products for the aerospace & defense, electric utility, renewable energy, and RF/electronics testing markets. It operates through three main segments: Aerospace & Defense, Utility Solutions, and RF Test & Measurement.

• ESCO completed its acquisition of Ultra Marine Signature Management & Power from PE company Advent International in April of 2025 for roughly $500 million in cash. The move expanded ESCO’s exposure to the naval programs of the U.S. and U.K., specifically submarines and surface ships.

FactSet Research Systems is a financial data, analytics, and software company whose platform is used primarily by investment professionals to research companies and securities, analyze portfolios, manage risk, and support investment decisions. It serves more than 9,000 clients and roughly 240,000 users globally.

• In November of 2024, FactSet completed its acquisition of Irwin, a Toronto-based investor relations and capital-markets software platform, for roughly $120.2 million from PE firm K1 Investment Management. Its products include an investor relations-focused customer relationship management (CRM), investor targeting, shareholder monitoring, and engagement analytics. (FactSet first established a partnership with Irwin in September 2023, integrating Irwin’s CRM into the FactSet Workstation.)
• FactSet acquired another company with which it had previously enjoyed a partnership in February of 2025 when it bought LiquidityBook for approximately $243.2 million from the latter’s existing shareholders, including PE firm Primus Capital. LiquidityBook offers cloud-based order management systems, investment book of record, trading technology, and FIX (Financial Information Exchange) connectivity for hedge funds, asset managers, wealth managers and other institutional investors.

Kadant is a global supplier of technologies and engineered systems that play integral roles in enhancing efficiency, optimizing energy utilization, and maximizing productivity.

• Kadant acquired Clyde Industries from PE firm Wynnchurch Capital in October 2025 for $175 million by borrowing under its revolving credit facilities. Clyde manufactures and services industrial boiler cleaning and efficiency systems, with its largest exposure to the pulp & paper and power industries. Its chief offering is the sootblower, which uses steam, air, or water to remove deposits of ash, slag and other substances while the boiler continues to operate, helping maintain heat transfer, efficiency, and uptime.
• In April of 2026, Kadant completed its acquisition of Austrian firm Bohler from voestalpine High Performance Metals GmbH, a subsidiary/division of the Austrian steel and technology group, voestalpine AG. The deal gives Kadant a critical supplier that it had targeted for years to secure specialized, patented processes.

MSA Safety is a global manufacturer of safety equipment and technology, mostly serving industrial workers and firefighters with products designed to detect hazards, protect people from them, and prevent serious injuries or fatalities.

• MSA Safety completed its acquisition of Autronica Fire & Safety in July of 2026 for roughly $555 million from Spectrum Safety Solutions, which is controlled by PE company Sentinel Capital Partners. Autronica is a Norwegian manufacturer of fire detection and safety systems, primarily for industrial, maritime, and other high-risk environments.

SEI Investments is a financial-services company that combines financial technology, outsourced investment operations, custody, and asset management. SEI provides much of the technology and infrastructure that investment firms, banks, financial advisors, and institutions use to manage money and run their businesses.

• SEI acquired LifeYield, a Boston-based financial technology company specializing in tax-smart investing and unified managed household (UMH) technology, including tax-loss harvesting, asset location, multi-account portfolio management, and withdrawal optimization, at the end of 2024. LifeYield was privately held, and its owners included two venture capital firms, Vestigo Ventures and Gibraltar Ventures.
• At the end of 2025, SEI completed the first stage of purchasing a majority stake in Stratos Wealth Holdings in which SEI agreed to acquire 57.5% of Stratos while legacy holders retained 42.5% of the company subject to put/call rights. The principal seller was Emigrant Partners, the wealth-management investment affiliate of Emigrant Bank.

TMX Group is the owner and operator of the Toronto Stock Exchange (TSX), though its business ranges more widely than running a stock exchange. TMX operates markets while providing trading, clearing, settlement, market data, and analytics services and has evolved into a diversified global exchange, financial data, and market technology business. TMX is not therefore not dependent on stock-trading volumes because a substantial portion of the business now comes from recurring data, analytics, and technology revenue, which substantially diversifies its revenue mix.

• TMX completed its purchase of Verity in October of 2025 from Resurgens Technology Partners, an Atlanta-based, software-focused PE firm. Verity operates two segments: VerityRMS, a research management system used by buy-side investment firms, and VerityData, which offers financial datasets and analytics that cover areas such as insider activity, share buybacks, executive compensation, and institutional holdings.

UFP Industries is a diversified manufacturer of wood and wood-alternative products used primarily in construction, industrial packaging, and home improvement/outdoor living. UFP buys lumber and other raw materials and turns them into higher-value products such as decking, fencing, structural components, pallets, and custom packaging. The company operates three segments: UFP Retail Solutions, UFP Packaging, and UFP Construction.

• UFP completed its acquisition of the operating assets of John Rock, Inc. on May 4, 2026, through its UFP Packaging subsidiary. John Rock manufactures wooden pallets and crates and was formerly part of Kamps Pallets, which is majority-owned by PE firm Freeman Spogli & Co.

Valvoline provides quick, convenient preventive automotive maintenance services and operates a large network of company-owned and franchised service centers across the U.S. and Canada. Its core offering is stay-in-your-car oil changes, generally completed in about 15 minutes, along with other routine maintenance services such as tire rotations, wiper replacement, fluid services, and other manufacturer-recommended maintenance. As of March 2026, Valvoline had more than 2,400 locations and performed more than 30 million services annually system-wide.

• In December of 2025, Valvoline completed its acquisition of Breeze Autocare and Oil Changers from Greenbriar Equity Group, a middle-market private equity firm. Breeze was an independent automotive preventive-maintenance operator with most stores operating under the Oil Changers brand, with an especially strong presence in California, Texas, and the Midwest. The deal means that Valvoline has added a large number of established stores in attractive geographies, potentially spurring revenue and profit growth.

As each of these “Quality Compounders” remains on the offensive, their ability to navigate macro uncertainty while capitalizing on the liquidity needs of private equity businesses remains a core driver of long-term value creation. Our process remains constant: searching for unique business models with high returns on capital and disciplined reinvestment rates.

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