Business case study on industry consolidation.from @douggrindstaff

Transcript

Private equity has found its next gold rush, and it's garage doors. But here's the question you should be asking yourself. How do you figure out what the next big industry is before private equity starts buying everything? Because three guys figured this out with garage doors at almost the perfect time. They launched Guild Garage Group in 2024. Rank less than two years better, after buying 30 garage door companies, they sold for 800,000,000. Now luck may have played a small role, but they were very diligent in their research. They watched as private equity poured everything into HVAC plumbing and electrical. Rather than competing with every PE firm and search fund in the country, they asked themselves, what's the next HVAC? Garage doors had four attributes that they looked for. First, it was 92% fragmented with roughly 15,000 independent operators. Worth noting because you can't roll up in an industry that already is consolidated by five major players. Second, it was a huge market, roughly $13,000,000,000 on the residential side alone and projected to grow between 89%. Third, the industry was still boomer coded. Most operators just hadn't adopted the technology, the branding, the digital marketing, and everything else that transformed HVAC. Fourth, there were just massive economies of scale. If you own 30 garage door companies, you can negotiate much better pricing on things like garage doors, vans, motors, insurance, software, and everything else better than a single person shop. But here's one of the more important thing they look for. They didn't wanna be first. They wanted at least one successful company ahead of them that proved this thesis. And that company was a one Garage Door. At the time, a one had already built a 9 figure business and sold half of it to private equity. They found this tiny window between nobody has proven this and everybody knows this worse. And that's exactly where you wanna look. Because in just two years, Guild went from 0 to 800,000,000. And now a one itself is being acquired by KKR in a deal valued around 2,000,000,000. So if you're trying to figure out what industry could be next, don't look at what's popular. Look for a large, fragmented, growing industry with independent operators that are unsophisticated. Now I pulled four industries that I think have some of these same characteristics today. Comment next, and I'll send you the list.