In a top-of-the-fold, front page exposure on Oct. 14, the WSJ highlights what they believe to be a significant change in the US economic picture, private equity firms buying their way into the mechanical service and construction industries. The article fails to mention that the same occurred in a slightly different guise twenty-five years ago. In 2000 US Filter bought a number of western US mechanical contractors. They were following the lead of other consolidators who anticipated a gold rush in infrastructure development, particularly in the growing computer hardware field. This trend, interrupted by the twists and turns of the national economy has continued to this day.
The real question, if there is one, is whom this phenomenon benefits and how much? No doubt some players see that the replacement of obsolete boilers and the introduction of supposedly more efficient heat pumps to take advantage of government subsidies related to the fight against climate change are an opportunity not to be ignored. Simply taking over the family businesses that have been the focus of mechanical service until now probably isn't the ultimate aim.
The mechanical trades are a tough business. Heavily unionized in the most lucrative areas, they require management with sharp pencils for successful bidding and experienced work crews with highly developed skills. As in many other businesses, the success of the private equity buyers will be contingent on the workers in the field more than the ownership.
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