BCI Acquires Significant Stake in Authority Brands
COLUMBIA, MD and VICTORIA, British Columbia – September 20, 2022 – Authority Brands, a residential services franchising platform in North America, today announced that British Columbia Investment Management Corporation (“BCI”), one of the largest institutional investors in Canada, has agreed to acquire a significant minority stake in the company, alongside funds advised by Apax Partners LLP (“Apax Funds”), which will retain majority ownership.
Authority Brands is the premier home service franchisor in North America. Its family of home service franchise brands are leaders in their industry, providing homeowners with services from the property line to the roof line. Authority Brands’ companies include 12 leading home service franchisors: America’s Swimming Pool Company, Benjamin Franklin Plumbing, The Cleaning Authority, Color World Painting, DoodyCalls, Homewatch CareGivers, Mister Sparky, Monster Tree Service, Mosquito Squad, One Hour Heating and Air Conditioning, STOP Restoration and Woofie’s. Together, these brands provide home services through approximately 860 franchise owners across North America.
Since the Apax Funds’ initial investment in 2018, Authority Brands has grown from two home service franchisors to the current 12, expanding into new geographies and services and building out a powerful infrastructure.
“We are proud to have partnered with the Authority Brands team to help build, both organically and through strategic acquisitions, a leading residential services franchising platform,” said Ashish Karandikar, Partner at Apax. “We continue to see significant room for growth by Authority Brands and are pleased to join with BCI and members of the leadership team in the next phase of the company’s journey as they extend their platform through M&A, and strategic initiatives including franchise development, technology transformation and international expansion.”
“As a long-term investor, we seek to invest in market-leading companies with strong management teams, multiple levers for growth, and resilient business models that create shareholder value, such as Authority Brands,” said Dave Hong, Senior Managing Director, Private Equity at BCI. “We look forward to working with Authority Brands and Apax to generate compelling risk-adjusted returns for our pension plan and insurance fund clients.”
“We could not be more pleased than to continue to build the premier residential services franchisor in partnership with Apax and BCI,” said Craig Donaldson, Chief Executive Officer of Authority Brands. “Both partners will add substantial value as we aim to capture further share in the highly fragmented home services market, including by evaluating M&A opportunities in new service verticals.”
Financial terms of the transaction were not disclosed. The transaction is expected to be completed in Q4 2022, subject to customary closing conditions.
Apax was advised by Harris Williams, Boxwood Partners, William Blair & Company, Moelis & Company (financial advisors), Kirkland & Ellis, Simpson Thacher & Bartlett, DLA Piper, and Lathrop GPM (legal counsel), and Ernst & Young (financial and tax advisor).
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada with C$211.1 billion under management, as of March 31, 2022. Based in Victoria, British Columbia, with offices in Vancouver and New York City, BCI is invested in: fixed income and private debt; public and private equity; infrastructure and renewable resources; as well as real estate equity and real estate debt through our independently operated platform company QuadReal Property Group. With our global outlook, we seek investment opportunities that convert savings into productive capital that will meet our clients’ risk and return requirements over time.
BCI’s private equity program actively manages a C$24.8 billion global portfolio of privately held companies and funds with long-term growth potential. Leveraging our sector-focused teams in business services, consumer, financial services, healthcare, industrials, and technology, media and telecommunications, we work with strategic private equity partners to source and manage direct and co-sponsor/co-investment opportunities.
About Apax Partners LLP
Apax Partners LLP (“Apax”) is a leading global private equity advisory firm. For nearly 50 years, Apax has worked to inspire growth and ideas that transform businesses. The firm has raised and advised funds with aggregate commitments of more than $60 billion. The Apax Funds invest in companies across four global sectors of Internet/Consumer, Tech, Services, and Healthcare. These funds provide long-term equity financing to build and strengthen world-class companies. For more information see www.apax.com
Apax Partners is authorised and regulated by the Financial Conduct Authority in the UK.
About Authority Brands
Authority Brands is the premier residential services franchising platform providing services from the property line to the roof line. Authority Brands’ companies include 12 leading home service franchisors: America’s Swimming Pool Company, Benjamin Franklin Plumbing, The Cleaning Authority, Color World Painting, DoodyCalls, Homewatch CareGivers, Mister Sparky, Monster Tree Service, Mosquito Squad, One Hour Heating and Air Conditioning, STOP Restoration and Woofie’s. Together, these brands provide home services through approximately 860 franchise owners across North America. Authority Brands, which is headquartered in Columbia, Maryland, is dedicated to supporting individual franchise owner growth with a full suite of marketing, technology, and operational support, allowing them to focus on providing exceptional service to homeowners. Please visit www.authoritybrands.com
BCI has agreed to acquire a significant minority stake in Authority Brands and Apax will retain majority ownership.
I would suggest you read more about this company to familiarize yourself on its success and growth trajectory:
Growth Through Acquisition
Authority Brands has grown over the last 3 years through acquisition of strong brands across the home service space.
We choose the verticals we move in to based on several criteria:
Authority Brands selects market leaders in highly attractive markets that are stable and growing.
We focus on low disruption risk – areas that will not be upset by innovation in technology or changes to economic condition. They’re essential services and services people do not or cannot do for themselves.
Most critically, our ideal brands are ones that have strong unit-level economics and allow franchise owners to build large businesses.
Essential Home Services Customers Trust
Though Authority Brands offers a lot of support to our franchise owners to ensure their success, the true reason our brands are so successful is because they provide reliable, essential services that people need. Whether customers are looking for last-minute plumbing services, need a fix for their pool, or are seeking industry-leading mosquito control, they know that an Authority Brands company can always be trusted.
The History of Authority Brands
In September of 2017, The Cleaning Authority was purchased from PNC Riverarch by Apax Partners. With this change in private equity ownership, the leadership team and ownership team of The Cleaning Authority saw opportunity to bring its platform to more home service franchise brands.
With the first acquisition of Homewatch CareGivers in September of 2017, Authority Brands was formed. Within the next three months, Authority Brands acquired two outdoor brands, America’s Swimming Pool Company and Mosquito Squad. In spring of 2019, Authority Brands closed its largest acquisition to date and welcomed three brands: One Hour Heating & Air Conditioning, Benjamin Franklin Plumbing, and Mister Sparky Electric. In September and November 2020, just two short years after forming, and in the midst of a global pandemic, Authority Brands completed its respective eighth and ninth acquisitions with Monster Tree Service and STOP Restoration. In February 2021, Authority Brands added its 10th home service franchise brand, DoodyCalls. In January 2022 we added our 11th and 12th brands, Color World Housepainting and Woofie's.
As we continue to grow, it is our goal to provide every service a homeowner could need, from the roof line to the property line. We are always looking to add new brands that meet our investment criteria.
The press release states since the Apax Funds’ initial investment in 2018, Authority Brands has grown from two home service franchisors to the current 12, expanding into new geographies and services and building out a powerful infrastructure.
When Apax bought Authority Brands in 2018, it issued a press release where it stated the following:
The acquisition by the Apax Funds will help the company accelerate its growth, both organically and through strategic acquisitions, as it looks to expand internationally and offer additional services. It also presents digitization opportunities as Apax intends to leverage its significant experience in this area to help Authority Brands provide enhanced software, digital marketing and systems to support its franchise partners. Under the terms of the acquisition, Authority Brands’ management team, led by Chief Executive Officer Rob Weddle, will remain in place.
Rob Weddle, CEO of Authority Brands, said: “We are very excited about the experience and depth the Apax team brings to this new partnership. Authority Brands has a vision to become the leading franchisor of home services by providing unparalleled business ownership opportunity to its franchisees and delivering first-class service to consumers. We are confident Apax shares in this vision and expect a bright future for Authority Brands.”
Ashish Karandikar, Partner at Apax Partners, said: “We have been attracted to the home services market for some time, due to its size, fragmentation and attractive growth rate. We have been impressed by Authority Brands’ established franchise network, experienced management, and strong track record of growth.
“We look forward to working with management and all franchise partners to accelerate growth, both organically and through M&A, as well as to leverage Apax’s significant experience in international expansion and digitization.”
In August, franchise-industry veteran Craig Donaldson was named the new CEO, succeeding Rob Weddle who stepped down.
With Apax and BCI as a new owner, it is clear the company will continue to grow organically and through strategic acquisitions.
For example, earlier this year, Authority Brands announced the purchase of Woofie's, a Virginia-based pet care franchise, marking the launch of the company's incubator for emerging brands :
Authority Brands' acquisition of Woofie's marks the launch of the company's incubator for emerging brands within the home services sector. The incubator is designed to leverage the company's in-depth home services experience to accelerate growth and development of smaller-scale franchise concepts that have a proven system and strong management.
"Woofie's is a great addition to the Authority Brands' portfolio as Amy and Leslie have built a strong brand with a passionate following," said Rob Weddle, Chief Executive Officer, Authority Brands. "Additionally, we're excited to leverage our extensive home services experience to fuel Woofie's expansion as well as many other emerging service brands. The launch of this initiative allows our Authority Brands' leadership to follow their passion – helping and guiding brands with great potential. We look forward to contributing to Woofie's future success and identifying others in the coming months and years."
Moreover, existing companies like America's Swimming Pool Company continue to grow nicely:
America's Swimming Pool Company the nation's leading swimming pool service franchise, is expanding rapidly throughout the country, opening 10 new locations in the first half of 2022. This growth includes the brand's first-ever territory in Michigan and a second in New York, as well as new franchises in key states such as Texas, Florida, New Jersey and Missouri. Each location provides swimming pool maintenance, repair, remodeling and cleaning programs to its respective cities and surrounding communities.
For BCI's Private Equity team, this latest stake continues its drive to do more direct investing, leveraging off its strong relationships with top funds and delivering better risk-adjusted returns.
If you read BCI's Corporate Annual Report 2021-22 here, you can skip over to page 66 to read about their private equity portfolio.
I note this on increase in direct investments and performance:
Since 2016, we have intentionally allocated a greater proportion of capital to direct investments, which typically come with significant governance rights. The program has directly invested in over 25 operating companies. As a result, the ratio of direct investments has grown from less than 20.0 per cent to approximately 38.0 per cent, producing substantial returns and significant fee savings for our clients. Fund investments remain important in diversifying the portfolio, generating consistent risk-adjusted returns, and providing the network to source co-investments and other direct opportunities.
Private equity investments are long-term in nature. While we report on a one-year basis, the five-year horizon is the most appropriate measurement of performance. On a five-year basis, the program returned 21.5 per cent, outpacing its benchmark of 13.2 per cent and generating approximately $16 billion of value for our clients ($7.5 billion over benchmark). Both fund and direct investments, outperformed their five-year benchmarks. On a one-year basis, the program had strong outperformance, returning 29.6 per cent against a benchmark of 14.9 per cent.
Record levels of deal activity and demand for private equity assets provided opportunities to lock in attractive returns in both our direct and fund portfolios. Through strategic secondary sales, we freed up capital to reinvest in what we expect will be higher-returning investments. We sold approximately 70 funds during the year, including the largest strategic secondary sale for the program to date.
Well-timed partial or full exits from our direct investments also supported the year’s strong performance. Total distributions for the year amounted to $8.5 billion — over $6 billion more than the previous year. The active markets also allowed us to deploy significant amounts of client capital: $6.8 billion in total, including $2.2 billion in direct investments, and $4.6 billion in funds.
Competition remains elevated for high-quality talent, and high-quality investments. Historically high valuations and increasing geopolitical tensions will create headwinds for private equity going forward. There is increasing evidence of inflation through our portfolio companies’ supply chains and in the broader pricing environment. Although our private equity portfolio has relatively low exposure to venture capital and growth assets, we have recently increased our focus on such investments as markets have become more volatile.
I also like what Jim Pittman, EVP and Global Head of Private Equity said when answering three questions:
I note this part:
Private equity is a relationship business — selecting the right investment partners is imperative, and our direct investments have outperformed funds on a 5- and 10-year basis. We are keenly focused on delivering value for our clients, while meeting other program key objectives, such as improving EDI, and measuring and enhancing ESG impact.
BCI has the right investment partners and Jim and his team are delivering outstanding long-term results for their clients, increasing their direct investments while improving EDI and enhancing ESG impact.
You can read my discussion with BCI's CEO/CIO Gordon Fyfe going over their fiscal 2022 results here as well as my coverage of BCI's 2021 ESG Annual Report here for more details.
When it comes to responsible investing, BCI is a global leader and working alongside top institutional investors to promote more collaboration in the industry, both in private markets and public markets.
Below, an older interview (May, 2020) with Rob Weddle, former CEO and Mike Pearce, CDO of Authority Brands, on how the during the pandemic, they deepened their relationships with their franchisees to support them during those difficult times, and how they gave back to the community.
Also, learn how by migrating to AWS, Authority Brands has simplified legacy environments, improved system availability and disaster recovery, and accelerated the onboarding of new acquisitions onto its system.
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