During an economic downturn, private equity firms seek stable businesses with predictable earnings. In a sector, investors are betting that people will continue to spend money on their homes despite rampant inflation. For example, a private equity firm pulls out Roto-Rooter franchisees.
“A major driver of industry growth is the increased outsourcing by homeowners of their essential plumbing and maintenance services,” Bohdan Tychynskyvice president of new york Bessemer Investors recount Mergers and Acquisitions. “Roto-Rooter is one of the most trusted and iconic brands in plumbing and RotoCo is well positioned to benefit from the growth of the sector.
RotoCo refers to the LLC investment Bessemer made earlier this year in the largest franchisee in Roto-Rooter Plumbing and Drain Service in the United States and Canada. Tyshynsky says plumbing and drain cleaning services have weathered changing economic cycles, and growth will be driven by aging homes in need of plumbing work, which has helped guide their investment thesis.
Negotiators told us the franchise industry has untapped M&A potential for private equity firms. Franchises attract buyers because they allow them to buy part of an established brand that has been around for a while, has good growth potential, and generates good cash flow.
Add Roto-Rooter to the list.
– Demitri Diakantonis