(Bloomberg Markets) — Charlie Mullins’ father worked in a toy-car factory. His mother cleaned homes. Today, Mullins has a £10 million London penthouse with a view of the Thames. “Tom Jones lives there, if you can believe it,” he says, pointing to the flat above him, where the Welsh singer is a neighbor.
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Mullins can credit his dazzling rise to the unlikely intersection of high finance and blue-collar labor. Over four decades he built a successful plumbing business that eventually employed his children and grandchildren. At the end of 2021, he sold his company, Pimlico Plumbers Ltd., to Wall Street giant KKR & Co. for £140 million ($178 million). KKR and other private equity firms are looking to snap up thousands of family-owned outfits in the US and Europe that ply the home-services trades—plumbing, electrical, air conditioning and heating, landscaping and pest control.
Investors are seeking a lucrative payoff in consolidating, or rolling up, a fragmented industry with $657 billion in annual revenue in the US alone, according to a 2022 report by Angi Inc., which matches homeowners with service companies. The report found that sales have been growing at a 10% or more annual clip recently as the huge generation of millennials start buying their own places, owners shift away from do-it-yourself and people stay in their homes longer because they don’t want to lose a low-rate mortgage.
Since 2014 investment firms have pumped more than $31 billion into hundreds of acquisitions of home-services companies, according to industry tracker PitchBook Data Inc. The KKR-controlled company that bought Mullins’ business is called Neighborly Co. Based in Waco, Texas, it’s acquired similar, often decades-old home-services companies in the US, the UK, Germany, Austria, Portugal and Ireland. “This is one of the hottest areas for private equity that we’ve seen,” says Sean Levy, a lead partner with Ernst & Young LLP’s EY-Parthenon private equity practice.
Before turning to plumbers and electricians, PE firms have bought up outfits in industries from supermarkets to hotels to hospitals, looking to cut costs, boost growth and, when successful, resell the company for many times their cost. Sensing healthy businesses ripe for modernizing, PE firms are paying top dollar for plumbing and other home-services companies: In a typical deal, they’ll offer $50 million for a family outfit with $5 million in cash flow, or profit before interest, taxes and other noncash items, according to Fred Silberstein, a Florida-based mergers and acquisitions specialist in the home trades. “PE has created an exit for these guys,” he says.
In the UK, Mullins has become a celebrity. With a spiky bleached-blond hairstyle that gives him a resemblance to the pop star Rod Stewart, he often appears on television, espousing conservative politics in his cockney accent. London newspapers like to call him the “UK’s richest plumber.” Photos of him with the politicians Boris Johnson, David Cameron and Nigel Farage cover the walls of his penthouse, near a portrait of Winston Churchill and a £180,000 custom-made red Steinway piano.
By selling his Pimlico Plumbers, Mullins, 71, was able to afford to buy his four children mansions scattered across an upmarket estate in Kent, southeast of London. “It’s everyone’s dream to help your family,” he says.
But after stepping back from operations once the deal completed, he now regrets selling. Pimlico’s sales declined after the acquisition, and a son and grandson quit the company in frustration. Mullins says he hears complaints about service from customers who still think he’s in charge. “They’re running it the American way, and that ain’t the way to run a British company, which is on a personal basis,” he says. KKR and Neighborly declined requests for comment.
Eager for their children to succeed them, owners of other home-services companies are resisting buyouts, often because they worry their organizations will lose the personal touch. These trades are among the last where people without a college degree can find a high-paying job. In the US, the top 10% of plumbers and electricians earn more than $100,000 a year, according to the US Bureau of Labor Statistics. Managers, as well as company owners, can earn far more.
PE firms are trying to keep existing founders in place and preserve their companies’ cultures, because workers in sought-after trades can always go elsewhere, Levy says. “There’s also some pretty fundamental differences in practices around what it looks like for a sleepy family-owned mom and pop versus a private equity-owned machine.”
In suburban Atlanta, veteran plumber Jay Cunningham turned down a $60 million offer for his company, Superior Plumbing Services Inc. A fixture in town who once starred in his own commercials, he’s known for going to Hawks basketball games with former heavyweight boxing champion Evander Holyfield, a close friend.
Cunningham employs five of his eight grown children and wonders what would happen after he cashed a PE firm’s multimillion-dollar check. “I’m not sure where the money’s going to come from, but if they are going to turn people into millionaires, it’s got to come from somewhere,” says Cunningham, 62. “It’ll be either the customer or the guys in the field.”
Cunningham says he’s spoken to former rivals who’ve sold out and complained of losing control, despite retaining a stake and holding a managerial position, and then facing pressure to cut costs. “Where is the fat that they’re buying?” Cunningham asks. “Is the fat here in the office? You know, my general manager gets paid $500,000 a year. Would they cut him?”
As anyone who’s remodeled a home can tell you, plumbers and electricians can be hard to find and uneven in quality and service. Getting a phone call answered or navigating a clunky website can be as challenging as finding an affordable home in “move-in condition.” In a survey of state regulatory agencies released last year, the Consumer Federation of America found that home-improvement repairs and contractors ranked No. 2 in complaints, after auto repair shops and dealers.
The Wall Street-controlled companies say they’re professionalizing these businesses while preserving their connection with customers. “Hi Neighbor. Need a helping hand around the house?” Neighborly asks on its website. Deep-pocketed investors can help establish technology such as apps to book appointments online and centralize costs including payroll and customer service.
Neighborly’s 5,500 franchises, with names like Mr. Rooter Plumbing, Dry Vent Wizard and Mosquito Joe, reported $4.1 billion in sales last year. One of its rivals, Sarasota, Florida-based Wrench Group LLC reports $1.5 billion in annual revenue from companies such as Parker & Sons in Arizona and Buckeye Heating, Cooling & Plumbing in Ohio. Its PE backers include Leonard Green & Partners, TSG Consumer Partners and Oak Hill Capital Partners.
In the 1990s, companies—including Memphis-based American Residential Services and Blue Dot Services, a unit of South Dakota-based utility NorthWestern Energy Group—also tried to roll up the industry. By the early 2000s, those same owners were either unloading their acquisitions or selling themselves.
Early investors ditched local brand names, added overcentralized customer service and failed to share the wealth with managers, according to Jaime DiDomenico, a 42-year veteran of the HVAC business. “They saw an easy path to dominating a fragmented industry, and when they got into it, they saw how difficult it was to standardize,” he says.
Corporate owners in the current generation maintain they’re taking a different approach, in part by keeping long-time executives in place. DiDomenico bought a company from Blue Dot in Sarasota, renamed it Cool Today and later sold it to Wrench, where he’s vice president of business development.
Ken Haines sold his company, Coolray Cooling, Heating, Plumbing & Electrical in Marietta, Georgia, to Wrench before becoming the parent company’s chief executive officer. By investing in technology, the bigger company lets even successful home-services business grow far faster, Haines says: “How do we pour jet fuel on an already raging fire? How do we get a larger share of customer homes? That’s what we’re focusing on.”
In Charlotte, home-services company Morris-Jenkins Co. was already upgrading its customer portal when it sold out to Wrench in 2021. With the new financial horsepower, it’s “Uberizing” its customer service, according to Morris-Jenkins’ CEO, Jonathan Bancroft. “You’ll be able to go onto our portal as a customer and be able to pick the technician,” he says. “And if you want them there at 3:07 p.m., we’ll be there at 3:07 p.m.”
Growing up in north London’s gritty Camden Town in the 1950s and ’60s, Mullins shared a single bedroom with his parents and three brothers. He recalls attending school with holes in his clothes and going to bed hungry. When he was 9 years old, a local plumber’s motorbike caught his eye. He began skipping school to help for a bit of pocket money and egg and chips in the evening. He saw how the plumber went on holidays and had cash and a car. Mullins left school at 15 and began a plumbing apprenticeship.
In 1979 he founded Pimlico Plumbers in a basement apartment in London’s Pimlico neighborhood. He sought to improve the industry’s reputation: no more failing to show up, no more scruffy clothes and dirty vans. So its services could be available 24 hours a day, Pimlico also charged more than its competitors, about £120 for a weekday visit just before the sale and more on weekends. “Even on Christmas Day we’d have staff working there,” he says.
Soon, his trademark blue vans—recognizable for their themed license plates, such as “DRA 1N,” “W4 TER” and “BOG 2” (UK slang for toilet)—were spotted everywhere across central London. In the year ended May 2021, Pimlico reported £49.2 million in revenue and distributed £3.2 million in dividends to Mullins, according to a government filing.
Mullins had some controversial labor policies. He forbade workers from using the internet or smart phones at the office, saying their personal lives shouldn’t distract from their work. He also provided no vacation or sick pay for plumbers, saying they were self-employed. One plumber sued, winning in 2022 when the UK’s Supreme Court ruled he was indeed an employee. (Mullins said the judges had ratified an outdated law.)
He’s also been known for making offensive comments. Even after Mullins sold Pimlico, the new owners felt a need to distance themselves after he said “someone should kill” London Mayor Sadiq Khan over his car pollution policy. On the same day, he also said it was time to “dump the Muslim mayor.” Mullins later apologized in statements to news outlets.
Online write-ups of Pimlico after the buyout are mixed. On Trustpilot, a customer-review website, Michaela Tagg said a Pimlico plumber left a hole in her ceiling and hit her with a £3,000 bill, then referred her to a debt collector when she disputed it. “I assumed with Pimlico Plumbers having the long history they do and with the higher hourly rate, they would be a trustworthy company to deal with,” she said in an interview. In an email, Pimlico says it conducted a thorough investigation of the complaint. In another review, on Google, however, Stephen James praised the company’s prompt and professional service, calling Pimlico “well worth the money.” (He couldn’t be reached for comment.)
Mullins’ son Scott, who succeeded him as CEO in 2019, was initially going to stay on to run the business and retain a 10% stake. But weeks after the takeover was finalized, he resigned and sold his interest. He says the new owners were too focused on saving money, making the job unduly stressful. He was particularly angry that they canceled an annual Christmas boating party on the Thames and considered eliminating the distinctive license plates. “The way we did it was right, because we wanted everybody to feel part of the business,” he says. Ashley, Mullins’ 27-year-old grandson, also quit shortly after the sale. He says the company now prioritizes internal meetings over dealing with customers. “It was dreadful,” he says.
After the acquisition, annual revenue declined 11% in 2022, to £44.8 million (after adjusting 2021 for a change in fiscal year), according to a government filing. The company said fewer people pursued home improvements after the easing of Covid-19 restrictions. Pimlico also cut its staff from 173 to 149.
Mullins senses weakness—and opportunity. “There’s a massive opening in the market,” he says. In September, as soon as his noncompete agreement expires, he’ll start operating another plumbing company, which he’ll call WeFix. “If you start a business like I did from just a van and a bag of tools, and then you build it into a £50 million turnover, and you cashed out on it, that’s the ultimate in business,” he says. And he’s already heightening the challenge. WeFix will open in a building in an industrial quarter of London’s Lambeth just a few hundred yards from the headquarters of the company he sold to KKR.
Meddings reports on UK business from Bloomberg’s London bureau. Sasso covers economics from Atlanta.
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