Residential Services: Erie Home Demonstrates Enduring Investor Appeal

Featured professionals: Brent Spiller, Zach Ledwith

Residential services continue to offer appealing investment traits despite macroeconomic challenges, with an aging housing stock, longer homeownership, and other themes creating a resilient need for a range of solutions. Across many areas, there are ample opportunities for investors to professionalize leading businesses, leveraging technology, marketing, and operational improvements to drive further growth and efficiency.

Below, our Consumer Group shares the themes driving investor interest in residential services and how recent client Erie Home exemplifies the market’s growth potential.

Long-Term Resiliency, Near-Term Opportunities

We expect the residential services market to show steady demand and resiliency due to several long-term trends, including a shift to suburbs and single-family homes, increasing millennial homeownership, expanding do-it-for-me interest, and an aging population.

In fact, our latest home services consumer survey showed that nearly 90% of respondents are equally or more likely to hire a home services provider than they were two to three years ago. Over 80% of consumers are also maintaining or increasing spending on home services compared to the same period, while only about 10% are more likely to perform these services themselves.

“Busier with work and family demands, consumers are more often looking to the experts to handle an expanding number of home-related tasks,” says Brent Spiller, a managing director.

While optimism is strong across residential services, the operating environment continues to evolve, increasing the opportunity for best-in-class platforms. “The world is more digital and complex, presenting new challenges to reach consumers that sophisticated operators are better equipped to navigate,” adds Spiller.

For instance, through technology and big data investments, leading businesses are optimizing their marketing budgets and funnels to reach the most attractive, valuable leads and differentiate themselves in key online channels. At the same time, best-in-class companies are pairing a strong digital presence with effective organic lead generation methods like canvassing, word-of-mouth, and referrals.

Beyond marketing, winning businesses are also bringing more value to their customers by offering a wider breadth of complementary solutions. This can enhance customer lifetime value, helping companies deliver profitability, maintain strong margins, and drive growth.

“The residential services sector encompasses a host of opportunities with attractive investment characteristics,” says Zach Ledwith, a director. “Exterior services, for example, tend to offer consistent, recurring demand and strong customer retention. The break-fix services category, meanwhile, is defined by its non-discretionary, non-deferrable demand and highly technical nature.”

Erie Home: A Scalable National Brand

Erie Home, a leading roofing provider, demonstrates the strong growth potential of critical home services that are difficult to do yourself. Harris Williams advised Erie Home on its sale to Leaf Home, part of the Gridiron Capital portfolio of companies.

One of Erie’s key traits that drew investor attention was its national scale, which allowed the company to bring local expertise, high-quality products, and personalized service to locations across the country. In addition, Erie built a comprehensive end-to-end customer solution for roof replacement. Its direct-to-consumer strategy, featuring a data-driven and agile marketing engine, professionalized call center, and expansive sales team, helped it to establish complete ownership of the customer journey and re-roofing process.

“Erie Home has grown organically by leveraging a single trusted national brand, sophisticated marketing tactics, and an efficient, repeatable greenfield model,” says Ledwith. “The combination of Erie and Leaf Home will bring significantly expanded capabilities and offerings for homeowners throughout the U.S.”

“Erie will continue to be well positioned for expansion thanks to many long-term demand drivers including a natural replacement cycle, the aging of America’s housing stock, and greater outsourcing of non-DIY-able tasks,” adds Spiller. “Supported by these themes, roofing and other similar residential services will remain highly appealing for investors.”

Prime Real Estate

With many opportunities to drive growth through innovative technology, better data, and a greater range of services, a variety of home services businesses continue to catch the eye of investors.

“There’s an array of residential services companies that have established themselves as category leaders,” says Spiller. “This large market offers plenty of room to invest in winning leadership teams, with many up-and-coming businesses and scaled, best-in-class companies primed to keep taking share.”

“We expect multiple subsectors to keep experiencing strong business performance and M&A activity,” says Ledwith. “Across these areas, there are a variety of ways to grow platforms through consolidation and professionalization, and we look forward to continue playing a meaningful role in this momentum.”

To learn more about M&A opportunities in residential services, please contact our senior professionals.