Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Rolling Up Plumbing Companies
Transcript
- Lucas: So you call a plumber because your basement's flooding. The guy who shows up drives a van with a name you don't recognize — something like 'Premier Plumbing Solutions' or 'Apex Pipe Services.' It feels local, but more often than not, that van is owned by a private equity firm. Luna: Right. And that's not just a hunch. The plumbing industry is in the middle of a massive roll-up wave, and it's been flying under the radar compared to, say, dental or veterinary. Lucas: Exactly. Today we're looking at how private equity is consolidating one of the most fragmented trades in America. We're talking about a market worth roughly $150 billion in the U.S. alone, with over 100,000 individual plumbing businesses — most of them mom and pop shops with fewer than ten employees. Luna: And the thesis is pretty straightforward: plumbing is recession-resistant. People always need toilets that flush and pipes that don't burst. Plus, the labor shortage means existing players have pricing power. Lucas: Right. So the PE playbook here is the classic buy-and-build. Acquire a regional plumber, centralize back-office operations, cross-sell services like drain cleaning and water heater installation, and then use scale to negotiate better pricing on materials. Luna: And you get multiple arbitrage too. A standalone plumber might trade at 4 to 6 times EBITDA, but a platform with multiple locations can fetch 8 to 10 times. So you roll up a bunch of small shops, slap a new brand on them, and after a few years, sell the whole thing to a larger PE firm or a strategic buyer. Lucas: That's the theory. And it's been working. One of the biggest players is HomeServe, a uk based company that's been on a buying spree in the U.S. since 2020. They've acquired dozens of local plumbing and HVAC companies, bundling them into a national network that offers service contracts directly to homeowners. Luna: But HomeServe is owned by a private equity firm itself — it was acquired by Brookfield Asset Management in 2022 for about $1.2 billion. So it's PE on PE action. Lucas: That's right. And then you have the franchise model too. Companies like Roto-Rooter and Benjamin Franklin Plumbing have been around for decades, but PE firms have been buying up franchise territories and converting them into company-owned locations. It's a way to capture more of the profit stream. Luna: So let's talk numbers. How many plumbing companies have been acquired in the last five years? Lucas: According to data from PitchBook, there were over 300 private equity-backed acquisitions of plumbing and HVAC companies between 2021 and 2025. And the pace accelerated in 2024 and 2025. The average deal size is around $15 million, but some of the larger platforms are doing $100 million-plus roll-ups. Luna: And who are the biggest PE firms in this space? Lucas: You've got the usual suspects: Berkshire Partners, which owns a platform called 'The Service Champions Group'; Leonard Green & Partners, which backs 'American Residential Services'; and a firm called 'Gridiron Capital' that's been very active in the trade services space. But there are also a lot of smaller regional PE firms getting in on the action. Luna: What's the pitch to the plumber who's been running his own business for 30 years? Why sell to PE? Lucas: The typical founder is in their late 50s or early 60s, they've built a successful business but they're tired of managing payroll, dealing with regulatory compliance, and handling after-hours emergency calls. PE offers them a liquidity event — they can cash out, take a minority stake, and stay on as a regional manager with less stress. Luna: And the PE firm gets a steady cash flow business with a built-in management team. Pretty attractive. Lucas: But there's a catch. The consolidation has led to some pushback from customers. When you call a big national chain, the service can feel less personal. And sometimes the pricing goes up because the PE firm has to hit return targets. Luna: There was actually a class-action lawsuit filed in 2024 against a pe owned plumbing chain in Texas, alleging deceptive pricing and unnecessary repairs. So the reputation risk is real. Lucas: And that's the tension. On one hand, PE brings capital, technology, and professional management. On the other, you risk turning a trusted trade into a commoditized service. The firms that succeed are the ones that maintain the local brand and customer loyalty while centralizing the back end. Luna: So what's the outlook for the next few years? Do we think plumbing will go the way of dental — where 20 percent of practices are now pe owned? Lucas: It could go even further. Plumbing is more fragmented — there are over 100,000 shops versus maybe 15,000 dental practices. And the barriers to entry are lower. But the consolidation is still in early innings. I'd estimate that less than 5 percent of the plumbing market is currently controlled by private equity. So there's a huge runway. Luna: Which means we're going to see a lot more 'Premier Plumbing Solutions' vans on the road. Lucas: Exactly. And if you're a plumber listening, now is probably the best time in history to sell your business. Multiples are high, demand for service is strong, and there are dozens of PE firms competing for deals. Luna: Yeah, it's a seller's market for sure. And we should say that this kind of deep dive into specific industries is exactly what listeners tell us they value most. If that's you, and you want to keep these episodes ad-free, the best way is head over to buy me a coffee dot com slash fexingo. It's a small gesture that helps us keep the lights on and the research deep. Lucas: And we really appreciate it. Because the more we can dig into these niches — plumbing, dental, HVAC — the better we understand how the economy actually works under the hood. Luna: Alright, back to plumbing. Lucas, you mentioned multiples are high. What's a typical EBITDA multiple for a plumbing roll-up right now? Lucas: For a platform with three to five locations, we're seeing 7 to 9 times EBITDA. For a single shop, maybe 4 to 6. The spread is narrowing as more capital chases deals. But the real trick is operational improvement — if you can bump margins from 15 to 20 percent through better routing and inventory management, that multiple expansion is pure profit. Luna: And there's a tech angle too. Companies like ServiceTitan — which just went public in 2025 at a $12 billion valuation — provide software that helps these roll-ups manage scheduling, invoicing, and customer relationships. So PE firms are also investing in the tech stack. Lucas: Right. ServiceTitan is essentially the operating system for the trade services roll-up. And PE firms are pushing their portfolio companies to adopt it aggressively. It's a force multiplier. Luna: So if I'm a listener thinking about selling my plumbing business, what's the first step? Lucas: Clean up your financials. PE firms want three years of audited EBITDA, a clean balance sheet, and a recurring revenue base — service contracts are gold. Then find a boutique investment bank that specializes in the home services space. Don't just call the first PE firm that sends you a letter. Luna: And what about the plumber who doesn't want to sell? Can they compete? Lucas: Yes, but they need to niche down. Focus on high-end custom work, or emergency service where speed and trust matter more than brand. Or band together with other independents to form a buying cooperative for supplies. Scale is a weapon, but it's not the only one. Luna: Good advice. So to wrap up: Plumbing is a $150 billion market, 95 percent independent, and PE is just getting started. The roll-up play is tried and tested, but execution matters—and customer trust can't be bought. Lucas: Well said. Next time your toilet overflows, take a look at the van that shows up. It might tell you more about the state of private equity than any pitch book.