30 Nov The Case for M&A in “Dirty Jobs”
It is both counter-intuitive and unfortunate that society often marginalizes dirty, blue collar careers. I also find it ironic that some of the most successful and profitable mid-market and lower middle-market businesses would be considered “dirty jobs” or “blue collar.” Society has bred an entire generation to frown-upon and spurn manual labor jobs in favor of the rigors of spreadsheets and slide decks. Fortunately, the employment pendulum sometimes swings the other direction. For instance, some Ivy League grads are ditching the desk for dirt. As they do, there is a realization that education, combined with the complexities and risks associated with some of today’s most marginalized careers, is creating real value. Investors are taking notice, including many highly-recognized private equity groups and family offices.
Sizzle sells and the sizzle in M&A is often had in the pre-revenue, high-multiple, asset-agnostic world of bits and bytes. The headlines for some of the most recognized software M&A deals will almost always suck the oxygen out of the room, but in the “real” economy where valuations are realistic and assets are tangible, there is still a great deal of value. Providers of both debt and equity know and recognize it as well. The prognosticators and talking heads may reference disintermediation and process automation across industries, but the human capital element will continue to drive demand. Robotics and technology will fortunately not be the ultimate hostile takeover.
I do not consider myself some high-flying, prep-school bred, Ivy League-educated investment banker. However, it would be equally disrespectful to put myself on the same level with many of the farmers, craftsmen and other skilled manual-laborers who provide true incremental value to the U.S. GDP. I’m somewhere in between spreadsheets and shovels. And so are many of the deals. If you look at the sheer volume of lower middle-market opportunities, there are a whole host of seemingly “dirty” sectors where mergers and acquisitions continue to remain strong, in spite of technological, financial and even recessionary shifts:
- Construction and related products/services
- Oil field services
- Manufacturing (both light and heavy)
- Farming and agriculture
- Fishing & livestock
- Industrial cleaning
- Landscape design and architecture
- Waste disposal and management
- Mining and milling
- and many other service-related businesses with ample scale
I really love this piece by Mike Rowe of Discovery Channel’s “Dirty Jobs.” He paints the picture perfectly stating that we have unfortunately marginalized many jobs. Some of the most successful and happy in the professional world put on boots and Dickies to go to work. They also receive solid valuations in today’s liquid and competitive private equity investors.
I didn’t grow up on a farm, but my father did. As a result of what he considered the idyllic scenario for teaching fundamental principals of work, industry and thrift, he did the best he could to similarly recreate–in some small way–his experience. Among many other things, he purchased wooded land in Western Washington where we cleared and split wood, encouraged us with early-morning paper routes, let us use the family lawn-mower for our 90+ weekly lawn mows and even the family extended ladder for summers of window washing. I’ve worked demolition, construction and landscaping and sold satellite dishes, security systems, pest control, lawn care and window cleaning door-to-door in less-than-ideal conditions. In college when I ran my first startup during summers between school, the family garage was readily donated for space for inventory and dad even provided capital for the first inventory purchases. Thanks to dad and American Express, two other successful ventures provided great returns and an excellent “school” out of the classroom. You can teach a farmer to do just about anything, but not every pencil-pusher and bean-counter can buck hay or shovel manure for long periods.
We not only lose something when we spurn success, we also are setting ourselves up for our own anagnorisis and peripeteia moments, especially when we spurn someone who does something dirty for a living. In my experience, the EBITDA of many CEOs without wingtips and a Linkedin profile dwarfs those who pontificate exhaustively of their own accomplishments.