Given resilient times, PE firms are going after businesses with recurring revenue in fragmented sectors. Construction is one of them. New State Capital PartnersShaun Vasavada explains the PE firm’s strategy behind its recent investment in Patuxent Roofing & Contracting.

“Given the fragmented nature of the re-roofing industry, Patuxent’s core focus will be to continue expanding share within the mid-Atlantic region as well as targeting attractive geographies across the U.S. Selective expansion of services is another potential growth avenue,” Vasavada tells Mergers & Acquisitions.

Patuxent, headquartered in Laurel, Md., primarily focuses on re-roofing services to hospitals, schools, government buildings and other high-end facilities that are subject to complex bid procedures and require operational specialization. Aging facilities is another growth driver in the sector, New State adds. New State is a Larchmont, N.Y.-based middle-market PE firm that invests up to $100 million across the business and financial services, industrials and consumer sectors.

Construction industry M&A is also being driven by businesses that are looking to add scale and capitalize on opportunities in new geographies.

“Our focus will be on M&A for potential geographic expansion, with specific interest in targets that have a similar customer profile as well as bid and job complexity for the services required,” adds Vasavada. “From a geographic perspective, we believe that Texas, North Carolina, and Colorado represent strong growth markets with these customer and project dynamics.”

Demitri Diakantonis