Niche Roll-Up Opportunities
Curious what niche roll-up opportunities people have been thinking about that haven’t already been overrun by PE. Feels like every multi-unit/service business with recurring demand has seen a wave of consolidation, but think there are still many under-the-radar plays that are still fragmented and flying below the radar. Has anyone seen any niche focuses or explored these either personally or within their firms?
Beauty clinics, auto mechanics
You mean *Medspa* and *Auto Collision*. Both already have notable private equity dollars behind them. Freeman Spogli, BC Partners, Princeton Equity and others are in medspa. Clearlake, Leonard Green, H&F, and others have been in collision (Crash Champions and Caliper Collision have become behemoths).
Maybe it's just me, but I had never seen a sole focus on trailer park consolidation (outside of a more diversified RE fund) prior to ~six months ago and now know of three independent sponsors actively raising money to do this.
To your point when MFs and UMM funds are doing things it's already too late down market. Medspa feels like the one where people will get killed as it is ultimately a discretionary spend versus a lot of roll-ups focused on recurring or mandatory services.
People have been rolling up manufactured housing communities for years. Been one of the hottest trades of the last 15 years and more specifically heated up a ton post covid.
Did you pull this off ChatGPT or the front page of google? These started getting rolled up a decade+ ago.
Wouldn't say beauty / medspas are niche. So many players in this space right now.
If we knew, we surely wouldn't post it here
There is literally no such thing as a longstanding existing niche people have identified as ripe for a roll-up strategy that PE isn't already in in some capacity. At least not in the EU/US.
Boba shops in SoCal
One of my friends is doing a vape store roll-up in the NYC area. Added an e-commerce platform and also started growing cannabis in Florida. Apparently, the business is doing better than expected. Self-funded, wealthy nuclear family that owns a ton of small businesses and are worth low 8 figures.
Another one that has happened for years and tends to be under the radar are BPO staffing agencies, buying up smaller competitors + consolidating back offices. Usually self-funded / SBAs though. Know of one that focuses on healthcare clients and sold to a MM PE recently.
This is legit. I know of a micro PE firm doing a vape roll-up in Texas and Florida. Mostly sub-1m EBITDA shops.
I kind of wrote about this in a post about LMM PE the other day.
To me the novelty of a rollup idea is less important than just the pure execution of just doing it.
There aren't too many spaces that are complete hidden gems that have entirely been overlooked by all forms of institutional capital.
Some are newer, some are more tried and try, but the fact remains that there are still more small businesses out there that can be scooped up by institutional capital. Hence why search funds have become more popular in recent years. I interviewed for one of the big Alpine HVAC rollups a couple years ago and the stat they had on the HVAC business was that despite all of the consolidation activity that they felt as though 80%+ of HVAC businesses were still privately owned. At the time Alpine's platform was $100M+ in EBITDA, so decently sized.
The issue is, a lot of these small businesses are too small and too fragmented for bigger PE to care about. A PE firm won't care to rollup a dozen $1M EBITDA HVAC businesses in Omaha, so they're all fighting for the $10M+ EBITDA ones of which there are far fewer.
If you're thinking about getting into the space, do your research on what makes a good business, but I wouldn't kill yourself over trying to do something that no one else has done yet, it'll probably be impossible. Invest in what you know and what you believe in. If you can chart a path to scale and by scale I mean $10M+ in EBITDA, especially in a particular geo, then I would worry more about the exeuction process of actually doing it, then spending cycles thinking about trying to do something no one else has done before. Honestly, doing something so novel might not even be worth it as you don't have a path to exit. What you really want is a little bit of PE activity, but not as much at the low end of the market such that bigger firms won't be willing/able to buy the sub $5/10M EBITDA businesses, that's the opportunity.
Now all that said, law firm rollups have been something PE has been sniffing around for a while. From a regulatory perspective, it's currently tough to do and given the nature of the service, more interpersonal, less standardized, etc it's not as perfect of a rollup concept as some of the others...but I know of a handful of firms that are hoping/waiting for a legislation change.
$1M EBITDA HVAC is exactly the target range for alpine shitcos
Why are they shitcos?
resi generator service is one that took off in 2022/2023. Plenty fragmented still. Seems like any other route based home service I would guess? GenNx360 had a ton of success with their platform from what I hear.
I also am a doubter of the underlying thesis in Medspa. We looked at a biz that did medspa equipment repair/procurement and they were getting crushed by sponsor backed and bootstrapped med spas defaulting/stiffing them on bills. Seems like the market is more fragile than it seems.
Also - things like medical weight loss/TRT clinics are hot as well, but with enough risk factors that bigger sponsors have stayed away
Also look at what's happening w/ FTI consulting. No idea why professional services businesses are so hot.
Vocational schools is not as common. But as everyone has said, most options have been done already.
Repudiandae quisquam ut iste unde animi eaque corporis. Debitis natus quasi est ea sed. Qui sint quod est nemo enim velit aspernatur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...