Despite inflation eating into consumers’ wallets, one PE-backed CEO says people will continue to spend money on their homes. In what way? Hagan Kappler, the CEO of The Riverside Company-backed Threshold Brands explains.
“A lot of the services we provide are pretty recession resistant,” Kappler tells Mergers & Acquisitions. “If people decide to pull back, if times get too tough on completely redoing a bathroom or a kitchen, instead they might say ‘I can make a couple of tweaks to the tile and grout,’ and that has an immediate impact on the look of the home.”
Boston-based Threshold recently acquired Granite Garage Floors, a provider of garage floor coatings. The garage services space is worth over $2 billion, according to Kappler, and the home services sector is fragmented. Kappler says garage services is attractive because the work is usually low-cost, can be done quickly and doesn’t require workers to come inside the actual home.
Threshold owns a number of franchised home service brands. In 2021 the company acquired USA Insulation, Plumbing Paramedics, Heating + Air Paramedics and Sir Grout. Threshold also owns the MaidPro, Men in Kilts, FlyFoe and Pestmaster Services brands. Riverside Co. formed Threshold in April 2021.
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 growth growth potential and generates attractive cashflow.
Threshold is not done dealmaking in this sector. “We are interested in all home and commercial services,” Kappler says.
Kappler can be reached at: [email protected]
– Demitri Diakantonis