During an economic downturn, private equity firms look for stable businesses with predictable revenues. In one sector, investors are betting that people will continue to spend money on their homes despite soaring inflation. As one example, one PE firm is snapping up Roto-Rooter franchises.

“A key industry growth driver is the increased outsourcing by homeowners of their essential plumbing and maintenance services,” Bohdan Tyshynsky, vice president at New York-based Bessemer Investors tells Mergers & Acquisitions. “Roto-Rooter is one of the most trusted, iconic brands in plumbing and RotoCo is strongly positioned to benefit from growth in the industry.”

RotoCo refers to the LLC investment Bessemer made earlier this year in the largest franchisee of Roto-Rooter Plumbing and Drain Service in the U.S. and Canada. Tyshynsky says plumbing and drain cleaning services have been resilient during changing economic cycles, and growth will be driven from aging homes needing plumbing work, which helped drive the thesis for their investment.

Dealmakers have been telling us the franchise sector has untapped M&A potential for private equity firms. Franchises are attracting buyers because it allows them to buy a piece of an established brand that already has been operating for a while, has good growth potential, and generates attractive cashflow. 

Add Roto-Rooter to the list.

– Demitri Diakantonis