Why Trilantic-backed Outdoor Living Supply bought nine hardscaping add-ons in 2022

Rising demand for beautifying the exterior parts of the home, a trend that was amplified during Covid, is whetting Trilantic Capital Management’s appetite to invest in the sector, partner Charles Fleischmann told PE Hub.

The New York-based PE firm launched Outdoor Living Supply (OLS), a Rochester, Minnesota-based supplier of products focused on hardscaping, in 2020. Since then, OLS has made 14 add-on acquisitions, nine of them in 2022.

The most recent was Tahoe Sand & Gravel, a South Lake Tahoe distributor of bulk materials, hardscapes and masonry supplies, in November.

“We think that [upgrading homes] was accelerated in covid,” said Fleischmann, adding, “but it’s part of a much broader 10-to-20-year trend where people are thinking about the outside of their home as a natural extension of their homes.”

Fleischmann said many homeowners now see the patio or backyard as their second living room.

As most people spent a lot of time at home under covid-induced lockdowns, some focused on improving their environments, in part boosting opportunities within the construction industry. But construction and remodeling the hardscapes (stone, tile, brick, wood, asphalt and concrete elements) can be a challenging business, especially when fears of a recession may force many homeowners to shelve home improvement projects.

“With rising interest rates, people are going to be much less likely to move,” argued Fleischmann, saying this could be a factor in OLS’s favor. “Rather than move and upgrade, some will just decide to upgrade their existing homes.”

Although some would view opportunities in hardscape upgrading as a seasonal activity due to unfavorable weather conditions, especially in winter, that could bar people from backyard activities, Fleischmann said warmer regions such as the Southwest will be largely unaffected.

“With the advent of big fire pits and outdoor heaters, we are actually seeing people use the back of their yards in a more year-round fashion than what they were doing some 10 years ago,” he said.

Adding on

He said OLS will be targeting between five to 10 more add-ons. OLS operates in almost 20 states and according to Fleischmann, some of the acquisitions will be focused on adding new geography.

The state of the economy presents another attractive opportunity to expand the OLS platform through M&A, as many founding business owners will be looking forward to cashing out their business and avoiding the difficult cycle and high operating costs, Fleischmann said.

“This is an interesting opportunity to be aggressive in terms of adding to the platform,” he said. Fleischmann, who described the sector as highly fragmented, said in the last six months, a lot of small business owners have been forthcoming in terms of closing deals.

Looking ahead to 2023, Fleischmann said: “We are finding that small business owners are much more interested in talking to us, given the prices that we are paying.”

Among its strengths, Trilantic said many business founders prefer to work with the firm because it is “family-friendly” and “entrepreneurial oriented.”

“These are great businesses,” he said, “but they are relatively unsophisticated in terms of how they are managed, and we think we can bring a lot of value and expertise to help them run more efficiently.”