Trading Up: PE Firms Have Been Investing Heavily in Trade Services, Now the Question Is How To Grow Them
Private Equity (PE) firms have been very aggressive recently in trade companies, with over 890 PE deals completed in these “ho-hum” sectors since 2021. HVAC has been particularly a hot space with over 620 deals.
This hunger for trade companies was featured by Te-Ping Chen, a front-page Wall Street Journal author, in October [1]. In the article, Chen wrote, “PE firms across the country have been scooping up home services like HVAC as well as plumbing and electrical companies [Trades]. They hope to profit by running larger, more profitable operations.”
Now that PE firms are more invested in the Trades, they face the challenge of professionalizing these businesses and accelerating EBITDA growth. In this space, larger does not necessarily mean more profitable. In fact, if PEs get it wrong, larger can be a disadvantage.
A&M’s experience shows that there are key topics PE firms need to get right both in professionalizing the business and accelerating EBITDA growth that are critical to the Trades but that often don’t get addressed. This article outlines the key themes to get right to ensure profitability as Trade businesses get larger.
[1]. America’s New Millionaire Class: Plumbers and HVAC Entrepreneurs. https://www.wsj.com/business/entrepreneurship/plumbers-hvac-skilled-trades-millionaires-2b62bf6c
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