Dealmakers are following the population growth dynamics in search of predictable reliable cashflow. As Americans continue to move to Sunbelt states, the demand for infrastructure and investment in architecture, engineering and design firms in those regions are piquing the interest of PE firms.
Godspeed Capital Management, a middle-market defense and government services and technology-focused private equity firm, has invested in Image Engineering Group, a Texas-based mechanical, electrical and plumbing firm focused on the education, commercial and retail markets. As part of the transaction, IEG will join Rachlin Partners and TSK Architects as part of Huckabee Architects, Godspeed’s AEC (architecture, Engineering and consulting) services platform targeting education and government markets.
“Population growth dynamics in the South (e.g. Texas and Florida) are necessitating more investment in education infrastructure, thereby, creating demand for Huckabee’s architecture and design capabilities,” says Doug Lake, founder and managing partner, Godspeed Capital. “AEC firms offer a high-margin, high free cashflow turnover professional services model that lends itself very effectively to private equity investments.”
With an uncertain economy, dealmakers are searching for firms with predictable revenue and profit numbers. Lake explains that Godspeed and Huckabee have subcontracted to IEG for work in the past and see the deal as a natural fit and positive revenue growth synergy as the firm can now insource the predictable revenue previously contracted out.
Additionally, the firm has identified the Sunbelt population growth dynamics that have led other PE dealmakers to invest in the demand created by the influx of people in the region. Population growth has created a need for investment in education and infrastructure where Godspeed has identified opportunities.
Keep an eye out for investments in Sunbelt state infrastructure, as the population growth shows no signs of slowing down.