Private Equity Firms Are Now Acquiring Skilled Trade Small Businesses

Turns out those years at vocational school and going into business instead of going to college are starting to pay off.

Other than having the benefit of learning a trade, private equity has now taken a keen interest in buying skilled trade small businesses, according to a new report from the Wall Street Journal.

Private equity firms nationwide are acquiring home services companies, such as HVAC, plumbing, and electrical businesses, aiming to create larger, more profitable operations.

This trend moves these companies away from family ownership, offering mom-and-pop businesses significant payouts, unlike previous generations where firms were typically passed down to children or employees.

Brian Rassel, a partner at the Detroit-based Huron Capital told WSJ: “You don’t need to go to Silicon Valley to have a successful career and entrepreneurial opportunities.”

Adam Hanover, chairman of Redwood Services, added: “Everybody and their uncle owns an HVAC business in the private-equity space today.”

The Journal report says that Redwood has acquired 35 companies in the past four years, from smaller businesses, typically bought for around $1 million, to larger firms like Rite Way, valued at about $20 million, where it takes majority stakes.

Rite Way, has thrived under Redwood, growing annual revenue from $30 million to $70 million. The company expanded beyond HVAC into plumbing and electrical services, benefiting from increased capital, more service trucks, higher staffing, and new apprenticeship and sales training programs.

Redwood also brought in accountants to focus on profitability. According to Redwood CEO Richard Lewis, small business owners often struggle to manage these tasks or fail to update pricing. Redwood reviews pricing quarterly to stay competitive.

The trades offer good wages for workers without college degrees and can serve as stepping stones for aspiring entrepreneurs. HVAC worker Aaron Rice, who co-founded his plumbing business in 2012 after overcoming addiction and prison time, sold the company when it had 18 employees and $3 million in annual revenue.

He said the sale has given him peace of mind, telling WSJ: “I want to hunt, fish, drink beer and cook meat.”

You can read the Journal’s full report here.

Source: ZeroHedge

Image: Rite Way owner Aaron Rice / credit: WSJ

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