FirstService Corp. recently made several acquisitions and more should be forthcoming as the company’s executives report they are well-positioned for growth. The parent company of Paul Davis and First Onsite has been relatively quiet this year, but that started to change in the fourth quarter.
The company completed four acquisitions within its property restoration service lines in October and November. The moves include the acquisition of one of its larger existing Paul Davis Restoration franchises and the addition of three regional commercial restoration firms to FirstService’s First Onsite Restoration platform.
The leaders of these businesses will continue to manage their respective day-to-day operations. Terms of the transactions were not disclosed.
Founded in 2001, Paul Davis Lincoln is one of the largest providers of restoration services in the Midwest, including emergency mitigation, contents and reconstruction restoration services for residential, commercial and institutional property owners and property managers. The Paul Davis Lincoln franchised operation serves central and northern Nebraska, southern Missouri and central Illinois.
This transaction is a continuation of FirstService executives’ strategy of selectively acquiring larger Paul Davis franchises to expand the company-owned operations.
First Onsite Property Restoration acquired three North American restoration companies.
Watermark, headquartered in Birmingham, Alabama, provides commercial property water and fire restoration as well as capital improvement and renovation services across the Southeast U.S. Confra Global Solutions, headquartered near Toronto, is a regional provider of commercial renovation and reconstruction services throughout Southern Ontario. Emergency Restoration Inc., a full-service mitigation service provider based in New Orleans. Founded in 2003, ERI specializes in property and water damage mitigation in the region.
There have been many mergers and acquisitions in the restoration industry in the past few years. This has been driven by a combination of inexpensive financing and many business owners looking for an exit strategy for their businesses. However, as the Federal Reserve raises rates to combat inflation, activity has started slowing in all industries.
FirstService CEO Scott Patterson said during the third-quarter earnings call that the company is actually better positioned than many to make additions going forward. He said FirstService has the liquidity necessary to move quickly in current interest rate environment.
The company recently entered into two new revolving, uncommitted financing facilities. The facilities aggregate to $450 million.
“The facilities provide us with the potential for incremental liquidity, financial flexibility and a streamlined process to tap into multiple tranches of Notes in varying amounts and tenors over the next three years,” said Jeremy Rakusin, FirstService’s chief financial officer, in an announcement about the financing. “These arrangements and the simultaneous $60 million 10-year note issuance have also further optimized our fixed and floating debt mix and enhanced the balance between our short and long debt funding obligations, thus reinforcing our debt capacity and overall strength of our balance sheet in support of our future growth.”
“For us, labor availability remains a big, big issue. If not the top priority, it’s close at every one of our brands.”
—Scott Patterson, CEO, FirstService Corp.
The biggest issue affecting the company’s growth going forward isn’t finding financing, but finding workers. Patterson said during the earnings call that too many positions remain open at entry level. He said this is going to remain a challenge for the foreseeable future.
“It has eased, but it’s been very incremental,” Patterson said. “For us, labor availability remains a big, big issue. If not the top priority, it’s close at every one of our brands.”
Overall, restoration revenues were flat in the third quarter. That’s due in part to weather events in 2021 and 2022. In the third quarter of 2021, FirstService was still finishing work for that winter’s Big Freeze in Texas. In 2022, the season’s hurricanes started at the end of the quarter.
Rakusin said the company will see an increase in revenues due to those storms, but for now it’s a cost.
“Our restoration operations incurred meaningful upfront mobilization and preparation costs in advance of those events without realizing any corresponding revenue during the quarter,” he said.
The bigger concern for FirstService executives during these storms is the safety of its employees, Patterson said. He said thousands of associates live and work in the area affected by the storms and many of them suffered damages and loss to their own properties. The FirstService Relief Fund was set up five years ago just for this kind of situation. The fund has already provided hundreds of grants to employees in the past months.