What PE Gets Wrong About Industrial Businesses

Most private equity frameworks were built around software businesses or consumer brands — assets where value creation is about multiple expansion and revenue growth. Apply that framework to a facilities management company in Gothenburg and you will spend two years confused about why nothing is working.

Industrial service businesses operate on different physics.

Margin is not the lever you think it is

The first instinct is to cut. Overhead, headcount, supplier contracts. This works until it doesn't — and it stops working faster in field service than almost anywhere else, because the product is the people. Technician attrition in the first twelve months post-acquisition is the single best predictor of whether a deal will perform. Every percentage point of attrition in year one costs roughly 1.5x that technician's annual salary in replacement and retraining costs, and another 0.5x in customer relationship damage.

Protect the operators. They are the asset.

Customer concentration is misunderstood

In software, customer concentration above 20% is a serious risk flag. In B2B industrial services, a top customer at 30–40% often signals a long-term maintenance contract, which is structural revenue. The question is not what percentage — it is what type. Contract-based revenue with 3–5 year terms and automatic renewal provisions is fundamentally different from project-based revenue, even at the same dollar amount.

Most deal teams do not dig into this distinction. The ones that do find that many apparently concentrated books are actually highly durable.

The operational leverage opportunity

What genuinely moves the needle in these businesses is routing efficiency, first-time fix rate, and asset uptime. These are measurable, improvable, and directly linked to margin. A 5% improvement in first-time fix rate on a 200-technician workforce is worth more than any procurement renegotiation you will find.

This is where technology creates real value: not in front-office automation, but in making the back-office decisions that determine how efficiently technicians spend their time.