Monkeys,
What are your experiences with the following roll up strategies, HVAC, Insurance, and Medical.
Platform size $50-150mm PF Revenue
What are typical add-on multiples, and general recap multiples? Trying to gauge multiple arbitrage.
What PE firms are known for each in the space? Generally speaking is it safe 2-4x returns?
What are key nuances of DD for each sector?
Which vertical provides better/more career opportunities on the fund side and on the portfolio company side?
Any firms to avoid or instances that the strategy didn't work?
Is the insurance roll up strategy played out and the bubble has popped- per some what some m&a insurance insider article is stating?
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What makes PF revenue have such a large range?
Crabs. Crabs are recession proof - people gotta eat. Live and die by the crab.
We’re crab people now, living off the fat of the sea
As a Philadelphian, I understand and appreciate this reference.
A lot of those are so saturated now, I’m not sure there is much opportunity there.
LMM roll ups in general feel like a bunch of turds bolted together that one PE firm passes to another.
Generally agree, I feel there is enough pressure upstream that MM PE firms are having to swim downstream.
'Medical' roll ups and roll ups in particular may face FTC backlash, a recent lawsuit was filed against Welsh Carson and USAP.
FTC Sues Private Equity Firm, Portfolio Company Over Anesthesiology Roll-Up Strategy | Insights | Holland & Knight (hklaw.com)
Anyone doing or knowledgeable of medical/healthcare lmm roll ups in the US?
Bump Any knowledge of roles in SE US, Texas, or SW US for corporate development? What’s the candidate pool like?
Send me a pm if your portfolio companies are hiring.
Bumping this
Interested in DSO/Healthcare roll ups - Are these safe with the Gov lawsuit in TX? (usually trade for 8-10x in the micro-cap add-ons, platform is 13-16)
Residential services - Siding/Building Supplies, Roofing, Doors & Windows (Anyone know what comps are for add-ons and a Platform?)
Construction - Cement, Raw Material Aggregates, Paving (Anyone know what comps are for add-ons and a Platform?)
Anyone have recent comps or known sponsors in LMM/MM/UMM investing in these?
You're about 5 years late on the DSO train. They're dead now.
My bad - are MSOs in the Ortho space the new thing? I got approached by one ha
What’s your view on veterinarian roll-ups?
Can you point to any good resources that detail the decline of DSOs over the past 5 years? Thanks!
Shoreline and Trivest both merged their existing paving platform sometime mid last year to form Pave America.
https://peprofessional.com/blog/2023/10/10/grove-mountain-partners-sell…
At a very high level...
HVAC - if its a residential service focus it is recession resistant. If it is more project-based / focuses on commercial customers its likely more cyclical (Education, Government, Medical end markets are ideal for commercial). Small add-ons trade for 4-6x and a scaled platform trades for 10-15x depending on mix and geography. Key DD items include new build exposure, customer concentration, end market exposure (if heavily commercial), deferability of larger projects, growth in number of service contracts, etc.
Medical - MedSpa and plastic surgery is cyclical (they will try and tell you it is recurring but doesn't usually hold up and is an overall competitive space). DSO/MSOs are meh. A lot of them get out over their skis on corporate overhead and don't generate a ton of cash and usually need a RR Corp. Expense concept in EBITDA definition to stay in bounds on covenants. Ortho/Pain/Spine roll ups have a lot of key man risk but are generally less cyclical as the procedures are less deferable. Key DD items are the key man risk, reimbursement rates, employee turnover, compliance/audit history, etc.
Insurance - I have no idea.
Hope this helps
This is really helpful, thank you. Would you mind explaining more about what causes the overhead / issues with scaling DSO / MSO businesses and also the cash flow problems? What is a RR Corp Expense? Thank you!
Anyone done any investing in home services (roofing or windows & doors), or insurance?
What do those trade for and sponsors actively doing well in those spaces?
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