This story is part of our October 2025 issue. To read the print version, click here.

It hit Taro Arai on April 2 when he was signing papers to sell his business Mikuni Restaurant Group: Exactly 40 years earlier, to the day, his family had come from Japan to settle in Sacramento.

Arai and his family opened Mikuni in Fair Oaks two years after moving to the Capital Region and have since built it into the best-known sushi chain in the area. And when Arai was in Japan earlier this year to close the deal with Vanshow California, a subsidiary of Pan Pacific International Holdings, his family’s journey came full circle.

“I couldn’t believe it,” says Arai, self-proclaimed chief dreaming officer of Mikuni. “I cried.”

Related: The Way We Work: Taro Arai

So it went with one of the biggest merger and acquisition deals in the Sacramento area in recent years — one that also helps explain the M&A market here.

What an M&A deal looks like in the Capital Region

Derek Chase founded his company OnSight Technology of Folsom in his garage.

“The story is really they used to inspect these really large solar farms with drones,” Chase says. “And given my background, I just knew that a lot of what really needed to be inspected was on the ground.”

One day, Chase went to a garage sale with his children Jackson and Chrissa, where they saw a small robot. Chase realized that a very large robot could do what he was seeking to do. Having just sold his previous company SunSystem Technology, Chase had the time and money: He bought his own robot.

Less than four years later, Chase had built a team of about 40 employees and secured seed funding from Moneta Ventures when OnSight was acquired by Nextracker, a publicly traded company valued at around $9 billion as of the time of the deal in late July. “They kept the whole team on, and we’re continuing to grow,” says Chase, now a vice president for Nextracker. “The goal was that they own a lot of the utility market and that they would actually help us grow and continue to build the company.”

Sometimes, a deal is a chance to close one chapter and begin a new one. Ben Seabury sold his shares to his former business partner in The 1100 Group, which has managed restaurants like Polanco Cantina (which Seabury also owns). Seabury is now involved in a new venture, Ryze Hospitality Group, which purchased Lowbrau and Holy Spirits in Midtown earlier this year. He’s found it’s more cost-effective to buy existing restaurants and try to take them to their second generation of life. “Developing a brand-new concept and then trying to launch it, that just takes a lot of overhead,” Seabury says.

Generally speaking, deals can be termed acquisitions rather than mergers. “Mergers rarely happen,” says Curt Rocca, managing partner for Roseville-based financial services firm DCA Partners (and a member of Comstock’s magazine’s editorial advisory board). “From an operating perspective, there almost always is a buyer and a seller.”

In some respects, though, deals are mergers. For one thing, they get done in California under the state’s merger statute, according to Afra Afsharipour, a professor of law at UC Davis who previously worked with New York and Silicon Valley firms on mergers. Most common, Afsharipour explains, are triangular mergers where a large company like Alphabet will create a wholly owned subsidiary to merge with the company they’re acquiring. Then there are the aspects for departments like HR, which must move things like employee contracts and benefits from the companies their firm has acquired.

Related: As Community Banks Get Acquired, What Happens to Small-Business Lending?

“Most things are acquisitions, technically,” Afsharipour says. “But then once you are the buyer and you’ve bought the target as one of your subsidiaries, then you’ll kind of roll up aspects of that subsidiary’s business into your business.”

Local companies that have sold in recent years include: Markstein Beverage Company, which sold its Sierra Nevada and Constellation Brands portfolios to a subsidiary of Reyes Beverage Group in 2023, according to a beer industry publication; Nor-Cal Beverage Company, which sold to Manna Beverages & Ventures in 2023; and Flyers Energy, which sold for approximately $775 million in 2021 to World Fuel Services. Then there’s Bell Brothers, which sold to Service Champions in 2020.

“A lot of construction and HVAC electrical-type companies are being bought up,” says Todd Eichman, a partner at Transworld Business Advisors of Sacramento Central & Napa Valley. “They’ll roll them up into larger companies, and they’ll sell them as a regional or statewide or even a national firm and you’ll get a higher multiplier.”

John Whitfield is a senior business development executive for Baker Tilly, a high-end accounting firm. Previously, Whitfield worked 15 years for Moss Adams, which in June, Baker Tilly purchased in a roll-up deal backed by private equity. Previously, the two companies were the 12th and 13th largest in their field. Combined, they are now sixth largest. “There’s great pockets in the Sacramento area, and it’s one that isn’t oversaturated from the standpoint of private equity firms like it would be in the Bay Area or some of those other areas,” Whitfield says. “So you get really good companies that haven’t been hit by a ton of LOIs (letter of intent).”

I think once we get through some interest rate reductions and we kind of get some of the tariff scares behind us, or understand what that means for the businesses, I think that you’re going to see a lot of people get back to the market.

John Whitfield, senior business development executive, Baker Tilly

Deals can often skew smaller in Sacramento, Afsharipour says. “The transactions in Sacramento tend to be a lot of smaller, private company transactions and relatively small transactions compared to what I was working on,” Afsharipour says.

But the region has its promise for M&A deals. For one thing, the market is active, with Chris Chediak, senior shareholder for law firm Weintraub Tobin, saying that there’s “always been a lot of companies in the Sacramento area that get acquired, and that’s because they’re joining a bigger company or because they … just want to cash out as a traditional lifespan.”

When a business sells, it can be subject to what are known as earnouts, wherein if the company hits certain benchmarks, its buyer will pay more. Donna Lucas and Cassandra Pye are currently in a five-year earnout period that could take the price of their firm Lucas Public Affairs, which sold in May 2024 to the London-based Public Policy Holding Company, from $7.5 million in stock and cash to $22 million.

Related: Trends Point to a Growing Interest in Mergers and Acquisitions

For PPHC, which is traded on the London stock exchange and is exploring listing on the NASDAQ, the acquisition of LPA is part of a targeted growth strategy. Thomas Gensemer, chief strategy officer for PPHC, says that his firm also acquired another local organization, KP Public Affairs in 2023. LPA and KP are among 11 small firms that PPHC has acquired in recent years. “We were very intentional about buying both of these businesses in Sacramento that represent sort of different pieces of our need there,” Gensemer says.

Alex Halbur, managing partner for Prosper Group and a business adviser to LPA during the sale, says it’s common for published deal prices to be higher than the value of firms. “In order to hit some of those numbers, there are certain growth metrics, both on the profit and the revenue side, that a selling agency needs to hit to kind of max out the number,” Halbur says.

Lucas and Pye, who is LPA’s president, each committed to remain in leadership roles with the firm for five years, with releases from both companies at the time of the sale describing it as a chance to partner. Lucas’s perspective on earnouts has been forged by a three-year earnout she did after the sale of a previous company she founded, Nelson Communications in 2000 to Omnicom. “I look at it like a marathon,” Lucas says. “You have to really pace yourself.”

Pye knows advice she’d give to someone considering selling a long-term business. “I say treat yourself, treat your business like you would a client, and step back, come up with a strategy,” Pye says.

Where the M&A market could be going

Certain things already make California a challenging environment for M&A deals, such as the state’s strict array of regulations.

“Definitely, that has killed deals before,” Chediak says. “‘We want to do X,’ says the buyer. Like, for example, ‘We want to be able to pay some of the software people for the manner in which they produce the products, but we don’t want to be paying them overtime, so to speak. We’ll kind of figure that in a different way.’ And we say to them, ‘No, California regulations — the law — do not allow that.’ And sometimes they’re surprised, because those states are much less hands on.”

Sacramento’s M&A market has faced some struggles of late. “It’s definitely softened over the last couple years, since the COVID boom, we could call it,” Whitfield says. “I’d say nationally, we’re down about 25 percent over where we were last year. There’s a number of factors kind of causing that.”

Whitfield points to factors like interest rates, which have soared in recent years, and tariffs. Funding has gotten trickier too, with Eichman saying that the U.S. Small Business Administration tightened rules around lending last year, now making it so that people must have a year of experience in order to qualify for an SBA loan where they only need to put down 10 percent. Otherwise, they’re stuck doing private loans where they’ll need to put down anywhere from 25 percent to 40 percent.

Related: The Industry Is Struggling, but Regional Vintners Think Wine Can Still Win

What it all adds to is people like Eichman hearing trepidation from clients. “I’ve heard from a lot of buyers that they’re a little concerned about tariffs and an economic slowdown,” Eichman says.

Slowdowns can affect seemingly every facet of economic life, from hiring to prices to deflation. Surprisingly, though, it can also drive down mergers, with Chang Liu, a finance professor at Sac State, saying he’s done research showing that mergers are more likely during economic booms. His team has also found that companies with insufficient capital are more likely to bid on mergers. “Typically, these firms have higher valuations for their stock,” Liu says. “So they can use that as a currency to acquire more physical assets.”

I’ve heard from a lot of buyers that they’re a little concerned about tariffs and an economic slowdown.

Todd Eichman, partner, Transworld Business Advisors of Sacramento Central & Napa Valley

Alternatively, though, during a stock market correction when the overall market can fall 20 percent or more, there will be less currency to be used in a prospective M&A deal. And even in boom times, the M&A market will have its limits, with not every company likely to sell or go public. Whitfield points to Raley’s and Pacific Coast Building Products, two well-known local businesses that remain independent.

Still, any contractions in the M&A market might not be of huge concern to people like Whitfield. “I think once we get through some interest rate reductions and we kind of get some of the tariff scares behind us, or understand what that means for the businesses, I think that you’re going to see a lot of people get back to the market,” Whitfield says.

In the meantime, people like Arai get to wonder what’s possible with Mikuni under its new ownership group. The business remains something very close to Arai and his family, with his brother-in-law the CEO, his brother the chief creative chef, his son the district manager and his daughter in charge of marketing.

Arai, who gave a phone interview for this story from a Vanshow location in Southern California, has stayed on in his leadership role for Mikuni. He anticipates working for the company for at least the next three years. Arai also speaks of the founder of PPIH, who is interested in greatly expanding Mikuni.

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