J&S Mechanical Contractors decided to sell to a strategic buyer rather than a private equity shop. J&S’ investment bank Crewe Capital tells us why and discusses the timing of the exit.
J&S first hired Salt Lake City-based Crewe two years ago to explore a sale. However, an acquisition was soon put on the back burner because of souring market conditions, particularly rising interest rates.
Then, in November, the economic outlook brightened and J&S was suddenly receiving realistic interest from strategic buyers and PE firms alike.
On Feb. 2, publicly traded Comfort Systems USA Inc. (NYSE: FIX) announced it was acquiring J&S, which oversees the installation of heating, cooling and electrical systems in large construction projects in Utah and the Mountain West.
“They wanted a partner that shared their values and vision,” Crewe founder and partner Michael Bennett says. “They valued a partnership that was thoughtful about a growth that made the most sense.”
Bennett says J&S had plenty of interest in recent months because J&S won some of the most lucrative contracts in the region, including projects at the Salt Lake City Airport, Utah State Prison and the Salt Lake Temple.
Bennett says J&S was reluctant to go with a PE suitor because of demands to add new services and aggressively grow through acquisitions outside their core competencies.
That’s in addition to having to prepare for another sale in three to five years if they ended up selling to a PE shop, He adds.
The transaction also highlights some of the factors strategic buyers have working in their favor these days. They typically have cash on their balance sheets and credit revolvers in place at more favorable interest rates than currently available. PE firms starting a new acquisition platform will most likely obtain new financing at higher rates.
On Feb 1, Comfort Systems completed the acquisition of Houston-based Summit Industrial Construction, a specialized industrial mechanical contractor. In February 2023, Comfort Systems acquired electrical design company Eldeco, based in South Carolina.
With that said Crewe and other investment bankers are hopeful 2024 will be a better dealmaking year than 2023. Fears of recession appear to be receding.