KKR, GI Partners, O2 Investments target janitorial companies; Windjammer Capital to sell parking biz IPS

Good morning dealmakers, it’s Obey Martin Manayiti here with the US edition of the Wire from the New York newsroom.

While some PE firms exercise caution around AI as they assess its impact on the sectors they cover, targets in blue collar segments are increasingly appealing to sponsors. We are opening today’s newsletter with a look at facilities management, with a spotlight on janitorial services. The janitorial sector is re-emerging as an attractive target after PE investors paused on the space after the pandemic. Disha Mehta, a managing director at Houlihan Lokey, and Jeff Sheu, a managing director at GI Partners, will share some of the factors attracting PE investors to the sector.

Next, we will look at Windjammer Capital’s plans to sell IPS Group, a San Diego-headquartered provider of parking infrastructure, to Nayax. PE Hub has seen a growing interest from PE firms in investing in parking infrastructure business. We’ll delve into the topic to finish.

Cleaning up

The janitorial sector has re-emerged as a target for private equity, after sponsors paused on the industry to see whether the boom in pandemic-era demand and earnings growth would hold up over the long term.

“There was a pause for a couple of years as private equity thought janitorial businesses were inflated,” according to Disha Mehta, a managing director at Houlihan Lokey. Sponsors waited to see what stable, post-pandemic earnings would look like. “Fast forward to 2025-26, the sector has emerged again as an essential service that is not going away.”

O2 Investment Partners, GI Partners, Inspirit Equity, Veritas Capital, Birch Hill Equity Partners as well as KKR, Ares Management and BlackRock are some of the investors in this sector, and their portfolio companies serve big institutions like schools, retail, commercial offices, healthcare facilities, data centers, among others.

The nondiscretionary element of the business is among the factors that make the janitorial services sector appealing. “This is an essential service that is not going away, and it doesn’t have AI risk or robot risk,” Mehta said. “PE has started spending more time on specialty cleaning especially when they serve end markets that are viewed as non-discretionary. This theme is going to continue for the next few years.”

GI Partners recently invested in HES Facilities Management, a provider of essential facilities services to educational institutions based in Knoxville, Tennessee. Jeff Sheu, a managing director at the firm, described the non-discretionary nature of the business as one of the opportunities that his firm identified.

“Schools and universities have to keep buildings clean, safe, and running through every economic cycle, and the work scales with the physical footprint, square footage, building count and facility condition, more than with discretionary budget decisions,” Sheu said.

Historically, square footage has grown faster than enrollment, according to Sheu, adding that square footage per student rose from about 130 in 1999 to about 180 in 2018 as districts replaced and expanded buildings faster than they closed them. “This is also why declining enrollment in some regions hasn’t meant declining demand,” he said. Other long-term contracts are found in healthcare, retail and warehouse facilities.

To read more on PE investments in blue-collar business services, check out PE Hub’s recent feature on roofing services transactions, our laundry-focused article as well our piece on HVAC.

Parking spot

Windjammer Capital announced this morning that it has signed a definitive agreement to sell its portfolio company, IPS Group, to Nayax in a $350 million deal.

Headquartered in San Diego, IPS is provides of smart parking infrastructure, offering single- and multi-space meters, mobile app, enforcement, permitting and payment services, as well as SaaS-based data analytics. Its customers include municipalities, universities and parking operators across North America, the UK and Ireland.

The company was founded in 2000, and Windjammer acquired IPS from family ownership in December 2020.

The deal comes at a time when PE firms are increasingly looking into investing in parking infrastructure. In 2024, we covered six deals, with KKR and Ardian among the firms transacting. PE firms cite repeatability and predictability as attractive attributes of the segment.

In 2024, KKR acquired the Parking Spot, a Chicago-based company that operates parking assets near large airports in the US. Founded in 1998, TPS has 47 strategically located parking properties at 28 major US airports. KKR acquired the parking assets from Green Courte Partners.

“This investment is in our infrastructure strategy where we look for assets that have very predictable and stable demand,” Dash Lane, a Houston-based partner at KKR, told PE Hub at the time. “There is predictable demand for parking services around airports and The Parking Spot is the best-recognized brand that owns facilities near large airports in the United States.”

The mobile parking payments sector is “largely underpenetrated and scalable,” Lightyear Capital partner Michal Petrzela told me earlier this year following the firm’s agreement to carve out PaybyPhone from Corpay. Headquartered in Vancouver, PayByPhone is a mobile parking payments company. PayByPhone works with 1,300 cities and operators across North America and several countries in Europe.

More than 110 million drivers worldwide have downloaded the PayByPhone app, according to the company.

“The market is only 40 percent penetrated, and there is still a lot of greenfield to replace the meters with coins that we all see in cities and parking kiosks, which are expensive for cities to maintain,” Petrzela, told PE Hub at the time.

That’s it from me this morning. Craig McGlashan will bring you the Europe edition of the Wire on Wednesday, while Rafael Canton will write Wednesday’s US Wire.

Cheers,
Obey