As highlighted by DC Advisory at the end of last year, the first quarter of 2024 has continued to see Private Equity activity interest in discretionary and non-discretionary Residential Services across the majority of the US. Palladium has been active on diligence across new platform investments and bolt-on acquisitions in this space. Here are three key themes that have consistently emerged:
Location-specific trends
The precision and recency of digital datasets lends themselves well to unpacking current market demand and competitive dynamics.
Example Analysis:
- Local Market Demand: Long-term trends in demand for the specific residential service in the target’s MSAs versus the US average.
- Greenfield / Expansion: Demand versus competitive density to identify opportunities for expansion, as well as viable levers (e.g. greenfield or M&A).
Illustrative Recommendation: Based on high per-capita search demand and low competitor density / visibility in 3 of 5 proposed southern expansion regions on a new platform investment, Palladium’s diligence identified low-hanging opportunities for value creation via new sites and M&A.
Sales and Marketing Diversification
Successful residential services businesses understand the value of digital channels for lead generation and broader customer engagement.
Example Analysis:
- Strategy & Channels: Using comprehensive outside-in data and internal analytics (if available) to assess current marketing activity and identify potential headroom based on competitor / market dynamics.
- Brand Equity: Assessing importance of brand / demand generation versus capturing existing demand in each MSA. How is the target performing on share of awareness / intent, and which strategies can be deployed to improve?
Illustrative Recommendation: With a national multi-location platform active in several of the PE target’s locations, Palladium’s diligence confirmed that there were still opportunities for growth and identified specific paid marketing channels to out-compete on a local level.
Voice of Customer
Capturing thousands of customer feedback points across social media, reviews and forums (with optional targeted surveys) for the target and competitors to deliver nuanced views of strengths and weaknesses.
Example Analysis:
- Buying triggers: Analysis of search behaviours and online conversations to quantify the relative weighting of e.g. price versus social proof (reviews, etc.) on buyers’ decisions.
- Competitor SWOT: Understanding per-location sentiment versus local and national competitors on key themes such as cost, customer service, quality of service etc.
Illustrative Recommendation: By validating a PE investor’s perception that competitors had a perceived advantage on price, but that the target excelled in quality and service (the key buying trigger in this space), the company was able to reflect this in marketing and sales materials, as well as make targeted pricing adjustments.
By focusing on these areas, private equity investors can identify opportunities during diligence for value creation in residential services businesses. Palladium's expertise in these sectors, combined with award-winning due diligence and value creation, ensures that investors have the insights, data, and strategies needed to make informed decisions and achieve significant returns.
Partner with The Palladium Group to Make Digitally-Led Change
For more information on Palladium’s Due Diligence capabilities, contact Ben Martin, Global Head of Transaction Advisory (Growth): ben.martin@palladiumdigital.co.uk In the U.S., please contact Steve Kittell, SVP Client Engagement: stephen.kittell@palladiumdigital.co.uk.
Please contact us today to learn more about how we can help you unlocking value in residential services.
