Maximizing Your EBITDA for a Private Equity Partnership

Rob Parker was working on Wall Street right after graduating from business school. He spoke two languages: finance, as well as the blue-collar vernacular that comes from being a Detroit native.

The managing director of residential and commercial services investment banking at Piper Sandler is also a former entrepreneur. That makes him fluent in the language needed to explain to business owners what’s happening when you partner with private equity. 

“ I’ve been an entrepreneur before,” Parker says. “I know what it's like to start something and be nervous and not sleep well for a long time because you don't know if you'll make it or not.” 

By his observation, market forces and technological advancements (including being on the ServiceTitan platform) have made the trades an attractive investment for private equity firms.

He points to the importance of maximizing EBITDA (Earnings Before Interest Tax Depreciation and Amortization). The term is essentially used as long acronym for cash flow. 

“ EBITDA is really a great proxy for the true earnings power of your company,” Parker says. “That is the single metric that [private equity] uses to hinge their valuation.” 

Parker notes that partnering with private equity should be a case-by-case decision for home services business owners. He does note that the world has gotten more competitive. 

“The bar has been raised,” he says. “And I think there could be some that if they're not willing to continuously learn and continuously innovate, they could have their share taken from them.”

Rob Parker recently joined ServiceTitan’s Jackie Aubel on the “Toolbox for the Trades” podcast, which included Parker’s thoughts on:

• [6:56] The COVID private equity boom and how partnerships have since evolved

• [16:58] Why trades company IPOs may become common in the not-to-distant future

• [23:39] The most important metric that PE firms look at when considering a partnership

• [31:18] How owners can prep their team for a company merger or buyout

• [43:44] Residential versus commercial PE partnerships

Check out these resources we mentioned during the podcast:

• Email Rob at Rob.Parker@PSC.com

To hear more stories from the trades, subscribe to Toolbox for the Trades on Apple Podcasts, Spotify, Google, or anywhere you get podcasts.