A fragmented but increasingly attractive segment of the consumer sector is seeing accelerated consolidation via private equity-backed M&A.
At-home or residential maintenance and repair services (dubbed “do-it-for-me” services) are the outsourced solution for consumers that do not have the time or know-how for common household upkeep, such as tile grouting, HVAC repairs, plumbing jobs, and other handyman tasks.
Mergers and acquisitions targeting North America’s home maintenance companies has steadily risen, reaching a peak of 182 last year, according to Mergermarket data. While this year has started more slowly, with 68 deals announced through 23 June, it is still on course to finish strongly. Deal volume – a less reliable indicator of appetite because valuations are typically disclosed in less than 5% of transactions – reached a peak of USD 22.6bn in 2020, dipping since.
The industry, which also includes pest control, maid services, deck and patio maintenance, pet waste removal, and garage door repairs, has traditionally been comprised of mom-and-pop outfits offering local services. Over the past decade, however, some players have grown into regional operations or even a franchised business model.
Now, PE firms are eyeing the high profit margins for in-person labor. Sponsor-backed platforms are rolling up middle market players to scale up in size and diversify portfolios. Those platform investments are a big driver of deal flow, said sources.
The majority of the segment’s strategics are looking for three to five bolt-on acquisitions per year, said Tim Shea, head of the business services group at Solomon Partners.
With some larger players approaching USD 200m of EBITDA, some should test the public markets as a source of liquidity over the next two to three years, he said.
Platform players
As more private equity firms see success stories with at-home residential services, the more confidence others have to enter the space, said Shea. His firm tracks more than 35 of such PE-owned platforms.
Sponsor-backed companies that are scaling include MidOcean Partners-backed Empower Brands, which was borne out of Lynx Franchising’s 2021 acquisition of Outdoor Living Brands. This year Empower scooped up Koala Insulation and Wallaby Windows. Threshold Brands, owned by The Riverside Company, last month bought Mold Medics and last year acquired Granite Garage Floorsand Sir Grout.
A major consolidator of at-home heating, cooling, ventilation and plumbing services, Leonard Green & Partners-backed Wrench Groupattracted minority investment from TSG Consumer Partners and Oak Hill Capital last year. It has bought 13 companies since 2020.
Over the past few years, New Mountain-backed Strikepoint Group rolled up at least 12 smaller add-ons; and Odyssey Investment Partners bought into the space via Service Champions, which has also been on an M&A tear. Other big players include OMERS Private Equity’s TurnPoint Services and GI Partners’ American Residential Services.
“Interest in residential services among private equity buyers has continued to grow over the last several years,” Shea said.
Generational drivers
The US has aging housing stock that needs repairs, noted one PE executive. Baby Boomers are aging and need help with bigger maintenance tasks. Younger generations – often in dual-income households – are willing to pay for the convenience rather than sweat over money-saving DIY (do-it-yourself) projects.
Many also don't have the handyman skills or know-how. “Roughly 60% of millennial buyers don’t own a toolbox,” said a sector advisor, who expects another record-breaking year of deal flow for at-home services in the lower middle market.
For private equity firms, though, the most attractive investments are in non-discretionary “break-fix” repairs, such as fixing broken heating units in the winter. These must-have expenditures don’t depend on household budgets.
How to Ace it
The at-home services scene is attracting a surprising strategic. National hardware chain ACE Hardware entered the space in 2019 with its acquisition of Handyman Matters, and it doubled down last year with Legacy Plumbing’s purchase.
Ace’s appetite for more at-home service buys remains high, an executive told Mergermarket in December. For Ace, the profit margins on in-person labor are much higher than retailing goods, a sector advisor noted. In addition, technicians often purchase their equipment from Ace Hardware stores, which fuels sales.
Analytics by Izaz Ansari
