By CEO Marc S. Cooper
As warmer weather returns and we adjust our thermostats, I sat down with Head of Business Services Group Tim Shea to discuss M&A trends in essential service sectors.
Tim, your team had a record year of deal activity in 2025. What’s been driving the strength of essential services — how do you define the market today, and what makes these services so resilient?
As Artificial Intelligence risk becomes more pronounced and less clear, there is heightened interest for essential services platforms that are not subject to obsolescence from AI agents. In 2025, our successful sell-side clients included companies in commercial landscaping, environmental / cleaning services, boiler maintenance services, electrical services, and fire and life safety.
In addition to being insulated from AI risk, these services are generally viewed as non-discretionary, and therefore non-cyclical. In uncertain economic times, these essential services businesses become even more appealing from an investor’s perspective.
Private equity interest continues to increase — what is driving that?
There are a few key factors at play. First, these are large, highly fragmented and stable markets with benefits to scale. That makes these markets particularly attractive for buy-and-build strategies. Second, there have been a number of private equity success stories in these sectors. The playbook has largely been written, and interest in these categories has not waned for businesses that have strong foundations and management teams, despite being fairly advanced in the consolidation cycle for many of these categories. Last but not least, as we just discussed, these sectors are viewed as very durable and not prone to AI obsolescence or reduction in the market opportunity.
We’ve seen a number of investors that historically focused on white-collar services shift their investment focus to essential services businesses. We’re often hearing, “We are going to avoid sectors within an unknown impact from AI.”
Valuations in the sector can vary widely. What differentiates higher-multiple businesses from the rest?
The winning formula for a high multiple is a combination of (1) sustained, above-market organic growth; (2) strong EBITDA margins — generally, into the double digits; (3) “revenue quality” — diversification of customers, strong end markets, and contractual / recurring revenue; (4) a track record of being able to consolidate; and (5) “platform value” — a catch-all for having a strong management team and infrastructure to support continued growth.
Data centers and other critical environments come up frequently in conversations with investors. How meaningful is that tailwind?
It’s a real and ongoing driver. The data center buildout is still early — more like the second inning than the eighth — and only certain contractors can participate. You need scale, specialized expertise, and a deep technician bench. Labor availability is a real constraint, and that’s where larger, scaled platforms have a competitive advantage. Smaller operators simply can’t staff or bid on these projects.
We’ve seen investors overlook project exposure when those projects are tied to critical environments and public markets are valuing these providers at significant premiums to historical levels — evidencing the belief that there is a long runway for continued growth.
Tim, what scale does a company need to reach to become attractive to institutional capital in today’s market?
The model has changed over time. Today, as little as $3–5 million of EBITDA can support an initial private equity platform, depending on the sponsor. From there, different investors focus on different stages of growth — some aim to scale to $15 million, others to $70 million or more. Eventually, at the very top end, the public markets become the natural next step simply because the universe of buyers narrows.
Learn more about the Business Services Group and deals they have advised on.