The Franchise Industry provides businesses with strong ROI opportunities if developed and grown correctly. The Dwyer Group, which is one of the strongest organizations in the service industry today, has just sold to a private equity group for $150 million. This represents a return on investment of three times the start up for the business. Franchising has the capability to put together these kinds of returns through the highly leveraged system of expansion.
By Beina Xu
After seven years of ownership, The Riverside Co. has announced that it is selling The Dwyer Group, a platform of seven franchise residential services businesses, to New York-based buyout firm TZP Group for roughly $150 million.
The deal earns Riverside a return of around three times gross cash on cash, according to Riverside Principal Chip Walker. Madison Capital provided senior financing for TZP.
Waco, Texas-based Dwyer provides residential and commercial cleaning and maintenance services under brands that include Aire Serv, Glass Doctor, The Grounds Guys, Mr. Appliance, Mr. Electric, Mr. Rooter and Rainbow International. The company also owns and operates 37 glass shops in New England under the Portland Glass brand name.
TZP and Dwyer were not immediately available to comment at press time. News of the exit will also appear in LBOWire, a daily newsletter published by Dow Jones.
Riverside took the company private in 2003 in a deal worth $54.5 million, investing more than half of that in equity, according to Walker. Madison and Babson Capital provided senior and mezzanine financing, respectively, on that deal. Dwyer had an active lead generation effort, but as a public company was wary of incurring the costs of expanding its sales force; Riverside in turn added infrastructure, aggressively hiring a sales team as one of its early initiatives, Walker said.
The platform had six businesses at the time of its buyout and shortly after, Dwyer did an add-on, buying Harmon Auto Glass in early 2004. That business folded into Glass Doctor. Ebitda growth during the seven years that Riverside held the company was around 13% year on year, Walker added. In March the firm got in touch with Harris Williams & Co. to shop the company, which officially went to market in August. All potential buyers in the final rounds of bids were financials, given the heavily franchised model of the company.
Dwyer was the firm investment from the 2003 Riverside Capital Appreciation Fund LP, which closed in 2004 at $750 million. TZP Group targets investments between $20 million and $50 million in companies with enterprise values generally up to $200 million. The firm focuses on business and consumer services niches like franchising, outsourced business and IT services, marketing and media services, travel content and distribution and consumer health services.
Harris Williams & Co. advised Riverside on the sale. Jones Day provided legal counsel.