In a dynamic and evolving landscape, the residential cleaning industry is witnessing notable developments and challenges as companies navigate the complexities of mergers and acquisitions. Jay Sachetti, founder of Bundl Home Cleaning & Maintenance, shared insights on the industry's trajectory during a recent panel discussion at the first Upsize on Tap event held in early October at Summit Brewing Co. in St. Paul. Sachetti, who has been active in the sector for approximately three years and has already accomplished several acquisitions, highlighted the current fluctuations in the market.
Sachetti remarked on 2024 being a positive yet less vibrant year compared to the period following the pandemic, primarily driven by a phase of historically low interest rates. “I think as we transitioned out of that environment there was some misalignment between seller expectations and buyer expectations and what those returns were going to look like with a different financial picture,” he said. The sentiment shared by Sachetti was echoed by panel participants including Jeff O’Brien, a partner at Husch Blackwell, and Dyanne Ross-Hanson, president of Exit Planning Strategies. O’Brien described the marketplace as "busy", while Ross-Hanson characterised it as “robust”.
Complications arise from the legacy of inflated business valuations that took place during the low-interest climate. Sachetti noted that these inflated multiples reset expectations, stating, "Through-the-roof multiples paid for businesses during the low interest period reset expectations and it has taken some time to re-regulate prices after the pandemic messed with financials for three years.” The erratic financial performance of businesses during the pandemic has made it challenging to assess their true value, often making financial evaluations complicated.
Another obstacle discussed by O’Brien is the risky practice by business owners of seeking poor advice before assembling a team of legal and financial advisers. "There was a lot of puffing going on about the value of the business prior to the contract getting signed and then, after the contract was signed, 'oh, actually, no, it’s a lot less,'" he explained. Experts advocate for early planning and assembling an advisory team before considering a sale to mitigate these issues.
Ross-Hanson highlighted the necessity for business owners to have realistic expectations, explaining that many assume selling their business will naturally lead to a bidding war, which she described as a dream rather than a feasible outcome. She advised that pre-planning is crucial to maximizing potential sales. “Having the right expertise on the advising team, building that early, starting the planning early, would be my recommendation,” she added.
An alternative path for business transitions involves Employee Stock Ownership Plans (ESOPs) or family succession plans. However, both approaches have implications for the sale dynamics and financial structuring of the business. O’Brien pointed out that the financing involved in family sales often requires seller financing, which can be a hindrance to maximising potential sales value.
The discussion also touched on the challenging realities of generational business transfers, with O’Brien noting a decrease in successful transitions as businesses evolve across generations. He elaborated on how many heirs to family-owned businesses may not possess the desire or drive to continue the enterprise as previous generations did.
On a positive note, Ross-Hanson cited recent findings suggesting an increase in business owners proactively preparing for exit. Through the Exit Planning Institute, it was revealed that twice as many businesses are planning for their exit compared to prior studies conducted five years earlier. “The subject of exit planning for privately held businesses has probably never been more pronounced than now,” Ross-Hanson reported.
The panel concluded with shared advice for business owners aiming to secure successful transitions. Each panellist underscored the importance of preparedness and assembling a competent advisory team. Sachetti particularly stressed the advantage of having a stable management team, an essential element that potential buyers regard favourably.
Looking ahead, all three panelists expressed optimism for the market in 2025, with O’Brien noting robust activity across various sectors from manufacturing to food and beverage industries. As ageing owners contemplate retirement and companies like Bundl pursue aggressive growth strategies through acquisitions, the potential for a thriving market remains evident. Sachetti affirmed his intent to continue pursuing acquisitions, indicating that he shares a positive outlook for the future of business transitions.
Source: Noah Wire Services