There’s a fundamental truth about investing in a services business: you’re investing in people.
That was a common theme from our discussion with the leadership teams at Lincolnshire Management and their recently acquired portfolio company, Powerhouse. While technology plays a key role in the business, the core of the deal is always the people.
By way of introduction, Lincolnshire Management is a New York based private equity firm focused on investing in middle market businesses. They’ve invested in over ninety companies across the past three decades. Lincolnshire embraces operational expertise as a key value creation lever within their portfolio companies. Their goal is to partner with the strongest managers in an industry.
“We look to buy companies that have a strong management is in place.” commented Michael Lyons, President of Lincolnshire Management, “In fact, our preference is to partner with operators who have worked in the industry for years, giving them the tools and funding to enhance their competitive advantages and accelerate growth. We invest in expertise.”
This philosophy extends to after the deal as well. Lincolnshire’s core staff includes between two and four operating professionals, members of the investing team who are focused on portfolio company success.
The PowerHouse Opportunity
Lincolnshire’s most recent investment, PowerHouse, is a national provider of refresh, remodel, and facilities maintenance services. They help large corporate customers manage building operations and strategic remodeling projects across large regions with many operating sites.
To appreciate the complexity of their work, imagine trying to install a specific retail kiosk or new service desk in every location of a retail chain. Each location requires contractors from several different trades to become operational (a carpenter, electrician, etc). The fact that many of these subcontractors are small local businesses adds to the challenge, since their contributions need to be woven together to meet a single corporate rollout date. PowerHouse provides a technology platform and network of local subcontractors to help corporate facilities managers deal with this complexity.
PowerHouse’s technology platform is designed to give corporate facility managers visibility into activity at a local level, without overwhelming them with detail and micro-management. Their solution includes a cloud based facilities management platform (Atlas), project management tools, and a worksite photo survey system.
Behind the scenes are their people, a key creator of customer value.
“We aim to make every client a Raving Fan of Powerhouse.” commented Robert Blake-Ward, principal at PowerHouse Retail Services, “We often get complimented on our sense of urgency, which is a key ingredient in our customer service and success. Our people react quickly and efficiently. When we get a work order, a Powerhouse employee answers the phone and is dedicated to getting someone out to the client’s location within hours.”
PowerHouse Responds To Covid-19
As the Covid-19 pandemic accelerated, it became apparent that facilities managers could play a key role in helping control the spread of the virus. First, they could redesign the workplace to make it safer for employees, reducing the level of face-to-face (or hand) contact between employees and customers. Second, they were tasked with implementing aggressive sanitizing programs to keep the workplace safe.
Buildings are surprisingly difficult to keep clean from microbes. Most cleaning teams focus their efforts on high contact surfaces, which has historically been enough to keep most pathogens at a reasonable level. Covid-19 proved particularly insidious in this regard, however, capable of spreading undetected through a workplace via asymptomatic cases and remaining active on surfaces for extended periods. Once Covid-19 was detected in a workplace, clients started asking for a deeper level of cleaning services to ensure employees and customers would return to a safe building.
Faced with evolving customer needs, PowerHouse rapidly assembled a service package focused on helping clients mitigate the impact of Covid-19 in March of 2020. Leveraging their core competencies, this service package included physical measures such as barrier installations, space reconfigurations, new signage fittings, and the installation of hands free fixtures. They also assembled a package of interior and exterior sanitization services. These were delivered through Powerhouse’s existing service platforms, providing a familiar mechanism for facility managers to deal with these emerging needs.
“One of the things that stood out about Powerhouse during our due diligence meetings was degree to which their platform simplifies rapidly scaling and managing a national program”, noted Lincolnshire managing director Philip Kim, “given the urgency of the Covid-19 response, Powerhouse was well positioned to help nationwide customers deal with these new challenges – quickly!”
Phase II – Expanding Capabilities
The Powerhouse platform also provides an easy path to bring new offerings to market. The technology provides a common framework for managing contractors: growth becomes a matter of connecting new providers to the system and cross-promoting services in the existing customer base. This was one of the key elements which made the deal attractive to Lincolnshire Management, as a potential platform company to drive growth within the building services space.
As they worked through the implications of dealing with Covid-19, the Powerhouse team identified a biotechnology company, Allied BioScience, with a unique offering in the space. Most disinfectants focus on killing germs which are currently on a surface. Allied Bioscience’s SurfaceWise2 works in reverse, coating a surface to continuously kill germs on contact for months after application. Identifying a potential game changer, a partnership was developed.
“Powerhouse moves with a great sense of urgency. As the pandemic hit, we felt it our duty to identify new resources and processes to help prevent the spread of COVID-19,” said Amber Alvarez, Senior Vice President of Business Development, Powerhouse. “This partnership enables PowerHouse to supply customers with the only proven long-lasting surface solution to viral spread. We see this as an invaluable tool to help employees regain confidence in their working environment.”
This strategic alliance has enabled Powerhouse to create a compelling offering that is highly relevant to their core market. Their platform provides an easy mechanism to move SurfaceWise2 into broader distribution. But people were ultimately the key to getting this program in place: knowing the market, knowing the capabilities, and finding a way to connect to two to move the business forward.