P/E firm buys Philly-area plumbers; Lincoln pays $52M for lost death claims
In their relentless hunt for cash flow, national buyout investors are going after your neighborhood plumbing and heating repair crews.
Owners Mark Aitken and Dave Geiger said Tuesday that they have sold their firm, Horizon Services, whose 500 plumbers, furnace and air-conditioning mechanics, and other staff run the company's orange utility trucks from depots in Wilmington, Mount Laurel and Norristown to homes from Connecticut to Maryland. The buyer is Sun Capital, the Boca Raton, Fla., private-equity company.
Sun boss Marc Leder is a co-owner of the NBA's 76ers and the NHL's New Jersey Devils. Sun owns Philadelphia-based paper-mill operator PaperWorks, Boston Market and Johnny Rockets restaurants, and dozens more U.S. companies, each with sales over $50 million a year.
Horizon calls itself "the region's largest and most-referred home-services company." The sellers, who grew Horizon (founded in 1987) by buying smaller firms, say Sun will pump in money to do more deals.
Sun declined to say how much it paid for Horizon. "If the sale price were greater than half [Horizon's] revenue, I would be surprised," Bob Whalen, owner of H.B. McClure, a Harrisburg home and commercial HVAC contractor, told me.
McClure, like Horizon, has about 500 employees; its yearly revenues from residential and commercial customers total about $80 million.
"My guess is the [price] is pretty restrained," concurred Andrew Greenberg, managing director at Philadelphia-based Fairmount Partners, which has handled service-company deals for McClure and others.
"There's not a lot you can do to improve the performance of a Horizon Services, except buy other, smaller operations and eliminate costs as you tuck them in," Greenberg added. Also, Sun "is known for buying troubled, under-performing or out-of-favor businesses" at bargain prices.
But maybe, "given Sun's knowledge of the equipment side of the business, they can do a better job of negotiating price and terms with the suppliers," scheduling service routes, and serving growing rental-housing markets, suggested Thomas Bonney, managing director at CMF Associates LLC, a Philadelphia-based consultant that advises buyout firms. Bonney said a buyer could easily pay at least 50 percent of sales for a growing service firm with repeat customers.
Sun Capital owns at least a couple of businesses that could sell services to Horizon, including Spectralink (mobile communications) and Bundy Refrigeration (cooling fluid systems).
The Philadelphia law firm Morgan, Lewis & Bockius LLP advised Sun.
You sure he died?
Lincoln National Corp., the Radnor insurance and annuity company, "lost track of thousands of claims" for Americans who bought life-insurance policies with one of its predecessors, Jefferson-Pilot Corp., financial regulators in New York said Tuesday.
Customer information vanished after Lincoln bought Jefferson-Pilot in 2006. Senior officers at Lincoln soon realized they had a problem — but it took the company until 2015 to "self-report" all that went wrong, according to Maria T. Vullo, New York state's financial-services superintendent.
The order followed "the untimely payment of certain death claims," Lincoln spokesman Michael Arcaro confirmed. Lincoln and its New York Lincoln Life & Annuity subsidiary eventually "self-reported" to regulators "that the company had lost track of thousands of policies after merging claims-processing systems with Jefferson-Pilot," Arcaro told me.
They have fixed the problem, he said.