Labor & Business

After Housing, Private Equity Targeting Home Services

Over the past year, corporations and private equity firms have been acquiring small local home service businesses, eliminating competition and prioritizing profit over service. Consumers must support independent providers to retain quality and investment in their communities.

Rhode Island News: After Housing, Private Equity Targeting Home Services

September 19, 2023, 6:49 am

By Uprise RI Staff

Over the past two years, private equity firms rapidly bought up homes and residential real estate at an alarming rate. By acquiring a huge share of limited housing inventory, these corporations artificially constrained supply and drove up rents and home prices. Low and middle-income residents got priced out of their neighborhoods, all to enrich distant corporate landlords.

Now, private equity has set its sights on local service businesses as the next target for extraction. These “roll-up” acquisitions target successful “guaranteed” markets such plumbers, electricians, HVAC repair technicians, and other critical home service providers. On the surface, this might seem like a win-win – the small business gets the financial backing and resources of a large corporation, while the corporation gets access to an established customer base and regional market share. However, these roll-ups come at a real cost to Rhode Island consumers and communities.

When large corporations acquire independent local businesses, they typically keep operating the acquired company under its original name. For example, most Rhode Islanders don’t know that Petro Home Services, Buckley Heating & Cooling, Wood’s Heating Service, Deblois Oil Company, and Mutual HVAC are all now owned by the same national corporation, even though they still operate under their original local brand names. Customers may think they are still doing business with a local company, but their dollars actually enrich an out-of-state corporate giant with no ties to the community. Plus, if the Google reviews of these firms is any indication, the friendly, neighborhood feel that customers relied on for years has been replaced by an impersonal corporate bureaucracy more beholden to the bottom line than local customers. These small business roll-ups typically result in appointment windows getting wider as technicians take on larger routes covering more territory, and prices inexplicably increase as competition dwindles.

The fundamental drive behind a roll-up is to maximize profits by eliminating the competition. They know customers will have little choice but to accept service changes and higher pricing thanks to the reduced competition and the critical need for home services.

So why are small business owners selling out? In many cases, the corporation makes them an offer they simply can’t refuse. The buyout provides a huge payday for the owner looking to retire or cash out. However, by taking the short-term cash payout, the community is left with reduced choices, lower quality services, and higher costs.

Recently, the FTC has hinted that this strategy may be illegal and the federal government is taking a close look at small business roll-ups.

In the meantime, consumers can stand up against roll-ups, but it takes deliberate action. Here are some ways Rhode Islanders can fight back:

  • Research local service providers carefully and choose independent businesses whenever possible. Look for “locally owned and operated” messaging.
  • Ask pointed questions about ownership structure when contacting service providers. Voice concerns about corporate buyouts.
  • Once a small business has been acquired, make your voice heard by filing complaints about declining service. Leave online reviews detailing how the changes have impacted you.
  • Switch to highly-rated independent providers, even if it means paying a little more out of pocket. The extra cost helps keep community businesses alive.
  • Support initiatives to limit corporate influence and monopolistic practices. Vote for candidates who promise to protect local businesses.

Independent local businesses are critical for healthy, vibrant communities. When corporations commoditize local services, they extract value from our neighborhoods to benefit faraway shareholders. By supporting local ownership, Rhode Islanders can retain quality services while investing in their communities. Together, we have power to stem the troubling tide of small business roll-ups threatening our state.