Fidelity Building Services Group (BSG), which Harris Williams recently advised on its sale to Onex Corporation, provides technical building solutions for the commercial and industrial facilities market through every phase of a building’s life cycle.
Here, Harris Williams professionals share what made Fidelity BSG an attractive investment opportunity as well as their advice for buyers and investors interested in similar HVAC, building automation, and energy management services businesses.
What does the private equity community find appealing about Fidelity BSG’s sectors?
Lucas: The space is huge and fragmented. The demand for these services is generally not economically correlated. These are primarily maintenance and repair-driven services, so they are nondiscretionary. And even in cases in which customers do delay, it can’t be for an extended period because their equipment has a finite useful life. If equipment needs to be swapped out, it’s critical to the operation of the facility that the job be done quickly and without interrupted operations.
Baltimore: The opportunity to build a defensible position in the market is another attractive factor. The industry requires specialized expertise, which, especially in a tight labor market, can be a meaningful barrier to entry. In addition, customer relationships can be very sticky. These companies keep mission-critical systems running, and there are risks and costs associated with switching.
Semple: Building owners, particularly commercial, industrial, and corporate customers, are increasingly focused on the environmental impact of their infrastructure. Companies that can deliver highly technical building solutions, such as Fidelity BSG, can drive meaningful improvements to building performance to not only lower costs and downtime but also reduce energy consumption, improve air quality, and provide actionable, real-time insights through building system data and analytics.
What made Fidelity particularly appealing to buyers?
Lucas: One important factor is having three different entry points to the building—HVAC services and controls, power systems, and building automation services—and getting in the door with customers from a few different service lines and then offering a holistic solution. In comparison, most competitors only have one point of entry.
Morris: The Fidelity team has invested a lot of time and energy in building its M&A capabilities. Within this enormous, highly fragmented market, it has a long runway to continue growing through M&A and will continue consolidating within its existing footprint. Fidelity is also growing into other attractive markets, such as along the southeast and Gulf coasts.
Walker: Another differentiator is Fidelity’s range of specialized capabilities, including its design and engineering expertise. This allows Fidelity to perform a wider range of services, including installations, light maintenance and repairs, heavy repairs, retrofits, and upgrades. It has all the people with the technical skill sets to provide a start-to-finish solution, from designing it to installing and then servicing it over time.
What advice do you have for other buyers interested in the space?
Lucas: In a nutshell, great companies in the space look a lot like Fidelity. They offer multiple services and have revenue that is recurring in nature. They’re good at M&A, and they’re able to take advantage of the fragmentation of the subsector. They emphasize service and retain their customers. The Fidelity business model is a good template for growth.
To learn more about this deal, please contact our senior bankers.
The Harris Williams Business Services Group has experience advising companies that provide a range of commercial, industrial and professional services. For more information on the firm’s Business Services Group and other recent transactions, visit the the Business Services Group’s section of the Harris Williams website.
The Harris Williams Energy, Power & Infrastructure Group has significant experience advising market leading providers of technology, services and products across a broad range of sectors. These sectors include energy management; infrastructure services; utility services; testing, inspection, and certification services; environmental services; engineering and construction; power products and technology; and energy technology. For more information on the Group’s experience, please visit the EPI Group’s section of the Harris Williams website.