Coveralls, steel-toed boots and work gloves are not the usual uniform of private equity. But this WSJ article reports that HVAC (heating, ventilation, and air conditioning), plumbing, and electrical services firms have become the latest rollup craze, with almost 800 such businesses being acquired by PE since 2022, according to Pitchbook data. And that’s not even counting smaller deals that don’t show up in the numbers.
Everybody and their uncle owns an HVAC business in the private-equity space today,’ says Adam Hanover, chairman of Redwood Services. The PE-backed home-services company bought Aaron Rice’s business in 2022 and merged it with Rite Way, a larger Tucson-based HVAC operation that Redwood acquired the year before.
Redwood has acquired 35 companies in the past four years. They range from smaller outfits (such as Rice’s), which Redwood says it buys outright for an average of $1 million, to more sizable companies (such as Rite Way), with an average valuation around $20 million, in which it takes majority stakes.
Private equity acquisitions are celebrated in diverse ways. The article reports that after the sale referenced above, Mr. Rice got a leg tattoo combining the logo of his company with that of the PE-backed platform it was rolled into. Many of the sellers of these businesses are not only receiving a hefty windfall, but also maintaining an ownership stake while they stay on at the new, PE-backed entity. In the end, there’s no contradiction between these worlds of private equity and the skilled trades. It’s all just business.