Financial sponsors are pumping money into a variety of residential services to consolidate fragmented markets largely made up of founder and family-owned businesses, often with recurring revenue.
Segments such as plumbing, landscaping and hardscaping, pest control and more are among the residential services subsectors attracting investment due to their resilience during economic downturns, an aging housing stock and overall increased home ownership among millennials looking to outsource these services.
Investors see the opportunity to buy and build businesses in the sector, which has historically been underinvested from a private equity perspective, said Peter Trovato, managing partner at Boston-based Copley Equity Partners LLC, which recently invested in commercial and residential roofing business Roof Depot.
“There are a great deal of small, local-focused businesses that haven’t necessarily invested in the systems and infrastructure to scale efficiently,” Trovato said. “If you have a nice platform, you can take advantage of some of that fragmentation.”
This week alone, four notable transactions involving private equity have crossed the wire, with more expected as each investment touted the potential for add-on acquisitions.
New Platforms Take Shape
Among those transactions were a pair of platform deals including the investment by Copley on July 11 in Alpharetta, Ga.-based Roof Depot for an undisclosed amount. Roof Depot, which predominantly operates in the Southeast, will look to expand geographically through M&A with Copley’s backing.
In particular, the company is looking to make bolt-on acquisitions in the South and Southwest regions of the country, Trovato told The Deal. The firm, which typically partners with family- and founder-owned companies for both platforms and add-ons, is interested in businesses that can benefit from Roof Depot’s existing and planned technological and marketing capabilities.
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