The Facility Services Industry and M&A

Facility services providers deliver a wide array of outsourced support functions to commercial, industrial, multifamily and residential facilities, including:

• Janitorial, sanitation, and general maintenance and repair
• Mechanical, electrical, HVAC and plumbing
• Security
• Fire and safety
• Disaster recovery
• Sign and lighting
• Landscaping
• Parking lot maintenance, lighting, and snow management
• Pest control
• Laundry

Driving the Demand

This several-hundred-billion-dollar global market is largely driven by commercial construction projects, a focus on reducing building operating costs, and outsourced facility management operations.

Heightened commercial construction activity galvanizes the necessity for facility support services because commercial premises require constant upkeep, repair, surveillance and cleaning. Increases in these construction and renovation projects are stimulated by:

• Strong levels of consumer and business confidence
• The need for rebuilding following natural disasters
• Increased corporate investment in capital expenditures
• Low interest rates

Any sustained action within these types of projects creates a favorable M&A environment for facility services providers.

Regulatory organizations also prompt the need for outsourcing of facility support services, as companies must deal with pressure regarding workplace health and safety protections and environmental regulations. These particular liabilities are why some facility services providers also offer value-added services such as risk management and labor law supervision.

The facility services sector has a history of drawing the attention of private equity, as investors seek asset-light business models with recurring revenue and add-on acquisitions. Additionally, large public companies continue to drive consolidation in their end markets. Because this industry is so fragmented, there is ample opportunity for strategic and cross-border acquisitions that lead to expanded geographic presences and broader product offerings.

Serial Acquirers

In this particular commercial services industry, there has been a tendency for certain acquirers to buy up several companies over the course of a shorter timeframe, most often in the testing, inspection, and certification segment. It has not been uncommon for one company to acquire more than five companies within one year. These types of serial buyers have developed a very streamlined approach to the M&A process, from evaluation to integration. Because of this, investors see these strategies as a steady source of growth, prompting companies to actively seek numerous incremental acquisitions.

Due Diligence and Acquisition Platforms

Because the M&A environment in the facility services market is very competitive and there is a prevalence of serial acquisitions, up-front due diligence is key to seeing a deal through to success. Aggressive buyers are able to gain an edge by conducting more of their due diligence prior to the formal launch of the deal process. This also aids in speeding up the endeavor.

An important element of the due diligence process for serious buyers in the facility services industry is the viability of the target company to serve as a platform for subsequent acquisitions. Many buyers view this ability as a mandatory feature of a deal. The prospect of future add-on acquisitions allows buyers to lower the overall acquisition multiple and get a better return on capital. This makes it a critical part of the due diligence process.

Facility Technologies

As the Internet of Things prompts transformation within all industries, the facility services sector has seen a shift towards software-based technologies.

• Digital facility maintenance platforms have improved the efficiency of processing work orders and enable more effective cross-organizational communication.
• Innovative technologies are being implemented to reduce maintenance costs, avoid expensive failures, and extend the life of equipment.
• The use of data systems enables providers to help clients reduce costs and energy consumption.
• Online systems make labor markets more flexible, improving productivity through on-demand workforces.
• Digitization enhances compliance with regulations regarding safety, zoning codes and financial transparency.

As interest in facility software platforms and support solutions continues to grow, so does investor interest.

Contact Us

Is your company ready for the next step? Set up a chat with one of our M&A experts at Benchmark International and we can discuss growth strategies, exit planning, or the partial or complete sale of your business. Our exclusive processes and global connections make our approach to M&A unique, which is why our clients love working with us.