Episode 159

1/11/24

Topic: Home Service Industry Roll Ups & What They Mean for You

Hosts: Dan Gordon & Donnie Shelton

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In this episode we discuss:

• The prevalence of private equity firms acquiring home service industry firms, including pest control, lawn care, HVAC and more

• How this trend is driving up valuations

• Is this different than the Sears or Waste Management expansions into pest control?

• How lawn care valuations have increased over the last two years

• Why Donnie used to be a lawn care "hater" but has changed his mind

• Differences between the pest and lawn businesses

• A look at two big home services companies: Neighborly and Authority Brands

• The potential end game for these firms — going public?

• Why home services are attractive to private equity firms

• Why Dan says the pest and lawn markets will always be fragmented

• Dan's view that some private equity firms aren't getting sufficient organic growth

• Why owners are choosing to sell to private equity firms

• The concept and benefits of rolling equity

• Tax intricacies of rolling equity

• Some downsides of selling to private equity

• Who's a good fit for private equity buyers

• How to prepare to sell to private equity (or any buyer), whether you're selling soon or sometime down the road

• How to think about selling from an owner's perspective

Resources mentioned:

• Article Dan wrote for PCT Magazine about private equity: "Private Ayes"

Notable: "There are probably hundreds of these PE firms who are kicking tires. Probably a quarter of them are serious and committing real capital." —Dan Gordon

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