With consumer interest in “Do It for Me” services on the rise, the market for all types of residential services is growing, from HVAC service to remodeling to lawn treatment. Fairway Lawns is a leading provider of residential lawn care services, including weed control and fertilization, pest control, and tree and shrub maintenance. Harris Williams recently advised Fairway Lawns on its sale to Morgan Stanley Capital Partners.

Here, Brent Spiller, managing director, and Zach Ledwith, director, from the Harris Williams Consumer Group, share insights on why residential services is a great sector to watch, what differentiated Fairway Lawns, and what investors should look for in winning assets.

What makes the residential services sector an appealing space for buyers and investors today?

Spiller: It’s an enormous addressable market bolstered by a strong macro housing market and demographic trends. Many companies in the sector provide recurring, nondiscretionary, and skilled services. The leaders have developed sophisticated customer acquisition and retention models, investing in digital marketing, high-touch consumer strategies, and such revenue-enhancing tools as auto-pay and auto-renewal agreements. Those investments can help remove friction from the transaction and drive customer retention.

Ledwith: In terms of M&A, the market is composed of many residential services segments that are highly fragmented and in the early innings of consolidation. There is significant opportunity to build a regional or national platform, and there are many benefits to be captured from building scale and greater sophistication.

What made Fairway Lawns particularly appealing to its investors?

Spiller: Fairway Lawns exemplifies why the residential services sector is attractive to investors. It has recurring revenue, serves an essential homeowner need, and is in a subsector that is very fragmented. It has the advantage of being an established brand in its markets, known for its excellent service quality and reliability.

Ledwith: Fairway has built its business with customer service and quality at the center of everything it does. It has invested in technological improvements and a centralized customer service center so that it is able to provide a single voice to the customer while offering local, personalized service. All of these factors contribute to high customer and revenue retention, which fuels baseline organic growth.

Spiller: Over the years, Fairway has expanded throughout the Southeast, and it has a repeatable expansion strategy to continue to grow in the Southeast and beyond. Its management team has strategically invested to create a best-in-class platform to garner the benefits of scale. For example, its state-of-the-art, purpose-built truck fleet creates high barriers to competitor entry. It invests in training and technology, which help to deliver great customer service and build customer trust. It maintains a lean operating model and has a sophisticated route management capability to optimize costs. It is also a business that can easily build density within a neighborhood, which creates even greater operating efficiency. Finally, management has created a metrics-driven culture that is supported by real-time analysis of key performance indicators.

What should buyers and investors look for in winning assets in this space?

Spiller: Winning assets look a lot like Fairway and other companies we’ve represented in the space, including Neighborly and SavATree. Great assets have high-quality service, strong customer retention and significant recurring revenue. They also have a solid, modern infrastructure in place that allows them to deliver a great customer experience and operate in a lean, cost-effective, and flexible manner. There are true benefits of scale that can be captured with the right infrastructure for growth.

Ledwith: The consolidation opportunity in many residential services segments is tremendous. Many segments, such as lawn care, are still very fragmented. If an investor can find the right asset on which to build, they will also find wide open spaces in which to create regional or national platforms.

The Harris Williams Consumer Group has deep expertise and experience in residential services as well as a wide range of other sectors. To learn more about high value opportunities in the consumer space, please contact our senior bankers.