As the environment turns more uncertain, some private equity firms are targeting companies that they consider resistant to downturns because of the product or service they provide.
Huron Capital, based in Detroit, Michigan, is pursuing such a strategy. The firm is looking for more add-on acquisitions in facility services to build up its three existing platforms, according to Brian Rassel, vice president at Huron.
Huron Capital plans more add-ons for Pueblo Mechanical & Controls, Albireo Energy and Sciens Building Solutions, Rassel told Buyouts in a recent interview.
“We see opportunities in recession-resistant businesses that operate in different economic conditions,” Rassel said. “Within that broad umbrella of companies, we see facility services companies as a specialty investment niche that Huron capital has cultivated.”
Recession-resistant businesses in the facility services sector include companies providing operations and maintenance for buildings, fire-detection providers and data centers providing automation and control services.
In the past few months, the firm has grown its three facility services platform investments through bolt-on acquisitions.
In July, Sciens Building Solutions acquired Critical System Solutions, a provider of fire alarms and sprinklers, security and emergency communication products.
In August, Pueblo Mechanical & Controls, a provider of HVAC maintenance, replacement, installation and repair, acquired Innovative Mechanical Systems (IMS), which provides similar services for commercial clients.
In September, Albireo Energy, which provides building automation, integration and energy services to commercial and institutional buildings, acquired energy management system provider Environmental Energy Corp.
A notable investment in this sector, according to Rassel, was Jensen Hughes, a consulting company specializing in fire protection engineering, code consulting and related life safety services.
Since Huron Capital first invested in the company in 2011, it grew annual revenue from $56 million to more than $175 million by the end of 2015, the firm said. In 2015, Huron Capital exited the investment through a recapitalization with Gryphon Investors.
One of the investing criteria for Huron Capital is the firm’s positive evaluation of a target company’s workforce, or its human capital, Rassel said.
“We are a firm that is comfortable investing in business where the asset—and the reason that business is successful—is based off of the unique technical talents of the people who work there…where there are a lot of people with unique skills who make that business successful and defensible and therefore make it highly valued by their customers, and they keep coming back,” he said.
Action Item: See Brian Rassel’s contacts here.