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Episode 159


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

Hosts: Dan Gordon & Donnie Shelton

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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