Private Equity Firms Are Acquiring More Skilled Trades Companies

Private equity firms are looking more toward the acquisition of skilled trades companies.

According to the Wall Street Journal, firms have acquired and consolidated almost 800 companies since 2022. Skilled trades, such as heating, ventilation, and air conditioning (HVAC), plumbing, and electrical, are deemed more favorable due to their stability through turbulent economic times and earning potential.

These businesses often scale up from these trained professionals’ entrepreneurial ambitions, making them profitable ventures for firms. However, these acquisitions essentially take over the management, which would have normally stayed within the original owner’s family or passed down to long-time employees.

Despite this, owners are still choosing to make acquisitions due to the sizable payouts. Entrepreneurs selling their businesses have also created a new sector of millionaires, as Forbes reported.

Through these acquisitions and the additional consolidation of smaller businesses, PE firms are increasing operations and marketing tactics to boost customer outreach. Moreover, the newly created companies can dominate the market and then sell at a higher valuation.

The number of people seeking careers in skilled trades has also skyrocketed, especially from younger demographics. According to the National Student Clearinghouse Research Center, enrollment in vocational-focused community colleges increased 16% between 2022 and 2023.

According to Data USA, most students at North American Trade Schools identify as Black, accounting for over 80% of those enrolled. However, their representation in the trade profession does not reflect these numbers. The Bureau of Labor Statistics also found that only 6% of construction workers are Black, and only 10% of electricians in the country are Black.

Acquisitions may even hurt the prospects of emerging and current Black trade workers. The increased focus on profit returns may lead to cost-cutting decisions, directly impacting employees. This could range from reduced benefits to heavier workloads to maximize efficiency and job insecurity.

Moreover, Black employees may be left out of pathways to ownership with PE firms taking over. These small businesses have been historically known for services ranging by provider. However, this new trend may create a landscape that leans more toward corporate and potentially to customers’ and employees’ detriment.

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