Garage Door Industry Consolidation: Insights from Guild's Co-Founder

The Genesis of Guild

Jordan Dubman, along with co-founders Joe Delaney and Sean Slik, started Guild after working together at L Catterton, an upper middle market consumer-focused private equity firm. Their experience at L Catterton involved buy-and-build investing and roll-up strategies, typically entering when platforms reached $20-30 million in EBITDA.

The founders saw an opportunity to start earlier in the consolidation lifecycle, incubating a platform from scratch in a fragmented industry. They raised $35 million from individual investors to launch Guild, focusing on the garage door industry as an attractive and under-consolidated segment within residential services.

Why the Garage Door Industry?

Dubman outlined several factors that made the garage door industry an appealing target for consolidation:

• $4 billion residential total addressable market
• 92% fragmented industry
• Projected 7-8% growth over next 5 years (vs 3-4% for HVAC)
• Recent precedent transaction (A1 Garage Doors) sold for 21x EBITDA
• Lack of scaled platforms created scarcity value

The fragmentation and growth potential, combined with the ability to be an early mover in consolidating the space, made it an ideal focus for Guild.

Guild's Acquisition Strategy

Guild looks to partner with leading garage door companies, typically acquiring a majority stake while having owners retain significant equity. Key criteria include:

• Minimum $5 million in revenue (for platform companies)
• At least 15% EBITDA margins
• Primarily residential focus (85%+ of revenue)
• W2 employees rather than 1099 contractors
• Limited new construction exposure (under 10% of revenue)

Dubman emphasized the importance of partnering with motivated owners who want to remain involved and grow their businesses as part of Guild. The company aims to provide resources, best practices sharing, and economies of scale to accelerate growth.

Deal Structure and Economics

In a typical deal, Guild acquires 65-85% of a business for cash, with the owner retaining 15-35% equity. Owners continue to earn their salary and receive their pro-rata share of excess cash flows quarterly. At exit, owners benefit from the multiple expansion of the overall Guild platform.

Dubman noted that most owners actually want to roll more equity than Guild allows, as they see the potential for significant value creation. The ability to partner with other top operators in the industry is also very appealing to many owners.

Value Creation Levers

Guild aims to create value through several mechanisms:

1. Multiple arbitrage - buying smaller companies at lower multiples and exiting at a higher consolidated multiple

2. Procurement savings - leveraging scale for better pricing on equipment, materials, software, etc.

3. Best practice sharing among partner companies

4. Professionalization of operations and adoption of technology

5. Continued organic and acquisition growth

Dubman emphasized that Guild is not simply looking to financially engineer returns, but to build a best-in-class operating company in partnership with leading garage door operators.

Long-Term Vision

While Guild will likely have a liquidity event at some point, Dubman stressed that he and the other founders are committed to the garage door industry for the long-term. He views Guild as building the dominant consolidation vehicle in a high-growth segment.

The company aims to continue partnering with top operators and growing both organically and through acquisitions. Dubman believes the garage door industry is still in the early stages of professionalization and sees significant runway for continued growth and value creation.

Key Takeaways for Business Owners

For home services business owners considering a partnership or exit, some key lessons from the discussion include:

• Focus on your core competency and avoid customer concentration risk
• Be thoughtful about revenue mix and cyclical exposure (e.g. new construction)
• Consider the benefits of partnering with other top operators in your industry
• Look beyond just the initial liquidity event to long-term value creation potential
• Assess cultural fit and alignment with potential acquirers/partners

Dubman emphasized that Guild takes a partnership approach and encourages owners to speak with their existing partners to understand the company's model and culture.

Conclusion

Guild represents an interesting case study in consolidating a fragmented home services segment. By partnering with leading operators and providing resources to accelerate growth, the company aims to build a scaled platform in the garage door industry. For business owners in home services, Guild's approach offers potential lessons in how to think about growth, partnerships, and eventual exits.

Article created from: https://www.youtube.com/watch?v=6sRDtty4dOg