The trend of private equity firms acquiring skilled trade small businesses, particularly in the home services sector such as HVAC, plumbing, and electrical services, is on the rise. A recent report from the Wall Street Journal highlights this movement, emphasizing the advantages that vocational school pathways and business ventures are beginning to yield for individuals in the trades. There has been a significant shift in ownership models for these businesses; rather than being passed down through generations, family-run businesses are now seeking substantial payouts from private equity firms. This influx of capital into skilled trades is recognized as a viable alternative to the traditional college route, with industry figures like Brian Rassel from Huron Capital stating that success does not necessitate a Silicon Valley connection.
The interest shown by private equity in the trades sector is noteworthy, with firms such as Redwood Services acquiring a multitude of companies over recent years. Redwood, for instance, has acquired 35 businesses within just four years, ranging from smaller firms valued at around $1 million to larger ones like Rite Way, which is worth approximately $20 million. The aim behind these acquisitions is to consolidate operations to create larger and more efficient entities. With the backing of private equity, businesses can access increased capital, enabling expansion into adjacent services and improving operational capabilities. This strategy allows for not only the growth of these companies but also opens up new opportunities for employees in the trades.
Rite Way serves as a prime example of a small business thriving under private equity investment. Since being acquired by Redwood, Rite Way has experienced tremendous growth in annual revenue, jumping from $30 million to $70 million. The company successfully expanded its offerings beyond HVAC services to include plumbing and electrical work. This operational expansion was facilitated by the infusion of resources, including more service vehicles, enhanced staffing, and the implementation of training programs for apprentices and sales personnel. According to CEO Richard Lewis, such firms often lack the financial acumen to optimize pricing strategies, thus Redwood’s strategic oversight has been pivotal in ensuring these businesses remain competitive in the market.
Another significant aspect of this trend is the potential for trade jobs to provide solid wages without requiring a college degree. The skilled trades are increasingly seen as a lucrative career path, offering income that can sustain a comfortable living. Many workers in these fields, like HVAC technician Aaron Rice, demonstrate how it is possible to build successful businesses from humble beginnings. After overcoming personal challenges, Rice co-founded a plumbing company that he later sold for peace of mind, showcasing how trade skills can serve as a foundation for entrepreneurship and financial stability.
The landscape for small trades businesses is changing fundamentally due to the growing interest from private equity firms. This evolution raises important considerations regarding the future of family-run enterprises in the trades sector. While these companies have traditionally been passed down through families, the current trend may signify a shift in how ownership and succession planning are perceived. Entrepreneurs looking to enter the trades may find that selling a business for a substantial payout is more attractive than managing a legacy operation, leading to a potential transformation in the industry.
In conclusion, the booming interest in small skilled trade businesses from private equity underscores a broader recognition of the value in vocational and entrepreneurial pathways. The ability to forge successful careers and create profitable businesses outside the traditional college framework is gaining traction. With substantial investments pouring into the sector, skilled trades are positioned for growth, innovation, and greater workforce development opportunities. As the workforce evolves, the pathways to business ownership in these fields become clearer, prompting a re-evaluation of societal views regarding education, vocational training, and the potential associated with skilled trades.
