M&A Activity in Fire and Life Safety Services Continues to Heat Up

Oct 2024

Long-Term Trends Underpinning the Fire and Life Safety Services Industry

Amid mounting regulatory oversight and compliance expectations in the fire and life safety services sector, investors are pursuing roll-up strategies. The fragmented sector’s recession resilience and recurring revenue streams make it increasingly attractive among buyers, driving record levels of consolidation in recent years.

Summary

Lincoln International has identified key factors driving interest in fire and life safety businesses.
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Regulatory Requirements Drive Demand for Fire and Life Safety Services

Local, state and federal codes mandate regular fire safety inspections, positioning fire equipment inspections and repairs as critical and non-discretionary investments in facilities. These requirements, often created in response to fire outbreaks, are constantly evolving and continue to drive sustained customer demand for fire and life safety service providers.

In addition to regulatory standards issued by and alongside state and local governments, industry organizations such as the National Fire Protection Association (NFPA) also issue mandates. NFPA hosts a library of over 300 consensus codes and standards. Industry organizations, such as the NFPA and Underwriters Laboratories, update key standards every three to five years to address safety requirements for fire alarms and sprinkler systems in various property types and construction-related requirements.

Grant entities, such as the Fire Protection Research Foundation (FPRF), also fuel fire and life safety service providers’ revenue. As grants introduce funding for improvements to firefighter safety, smoke detectors or CO2 alarms, they also create revenue for fire and life safety service providers.

Aging Infrastructure, Construction and Remodeling Act as Additional Revenue Drivers

In addition to establishing general codes and safety standards, the NFPA also mandated the installation of fire protection systems in new commercial construction projects. In older buildings, they mandated the replacement of obsolete fire alarms, sprinklers and detectors.

As older properties update fire safety systems to adhere to new policies, remodeling activities are expected to play a key role in fueling the fire and life safety services market. At the same time, construction will drive demand as new buildings comply with regulatory standards.

To further improve life safety and property loss prevention, industry players are turning to technologies that can prevent, detect and respond to fire and life safety related incidents. Armed with the additional information this technology can provide, for instance, the ability to monitor water pressure and flow rate of a building’s sprinkler system or detect fire faster through video-based systems, customer demand for upgrades and follow-on service work will abound.

Molding Business Models to Maximize Customer Trust and Scale Strategically

Multiple delivery models exist within the fire and life safety services market.

Self-perform fire and life safety businesses employ experienced technicians in-house. By managing technicians as employees, these businesses closely monitor employee training, service quality and job safety—all important facets of building trust with clients. To optimize route density, technicians typically service within a local area. This localized service model often helps self-perform businesses stay well-connected in their communities.

Vendor-managed fire and life safety businesses subcontract technicians to perform safety services. A highly scalable model, vendor-managed businesses leverage outsourcing to satisfy specific technician requirements and rapidly grow their geographic reach.

Hybrid service businesses combine self-perform and vendor-managed models, which provide the flexibility to service large, multi-site and national customers through vendor partners while also maintaining the expertise that comes from having local technicians on the ground. In addition, the hybrid-service model adapts well in a high-growth business or challenging labor market.

Lincoln Perspective

For private equity (PE) sponsors and strategics alike, fire and life safety businesses are ripe with opportunity. Deal flow in the space remains robust as investors consolidate the highly fragmented market.

Lincoln International expects high levels of consolidation to continue as PE firms and corporate players pursue roll-up strategies in resilient sectors. As consolidation occurs, portfolio companies will offer expanded capabilities across broader geographic footprints to a wider customer base.

Looking ahead, Lincoln has identified key factors driving interest in fire and life safety businesses:

Recurring revenue: Local, state and federal mandates create non-discretionary, non-deferrable demand for fire equipment inspections, repairs, renovations and retrofits in existing structures, driving recurring revenue for industry operators. Regulations will constantly evolve to address newly identified dangers that arise, ensuring that fire and life safety services remain top-of-mind.

Recession Resilience: Regardless of occupancy, structures are required to meet regular system inspections and updates. Fire and life safety services will remain critical, regardless of economic conditions.

Diversified end markets: Fire and life safety services are necessary in a wide range of commercial buildings from schools to restaurants to warehouses across the country. Service providers, particularly those with a wide geographic footprint, reach a diverse set of end markets, bolstering revenue stability.

High barrier to entry: Stringent regulatory hurdles and license requirements create a high barrier to entry in the fire and life safety industry.

Recent Notable Transactions

Many of the medium-to-large-size independent fire and life safety services companies have gone through successful mergers and acquisitions (M&A) processes since the beginning of 2024, represented by the highlighted transactions below.

AE Industrial Partners has sold Altus Fire and Life Safety to Apax Partners
- Altus Fire and Life Safety is a leading full-service provider of regulatory-mandated fire and life safety services to the commercial office, multi-family, medical and education sectors serving the Northeast U.S.
HGGC has sold Marmic Fire & Safety to KKR
- Marmic Fire & Safety specializes in the inspection, testing and maintenance of fire protection equipment for more than 56,000 customers across the commercial, industrial, multi-family, education, government and healthcare end markets in the U.S.
TorQuest Partners has sold Onyx-Fire Protection Services to Blackstone
- Onyx-Fire Protection Services is Ontario’s leading fire and life safety services provider, offering inspection, service and repair and installation of fire and life safety systems to a diverse array of end markets.
Knox Lane has acquired a Majority Stake in Guardian Fire Protection Services
- Guardian Fire Protection Services is a premier fire and life safety services business with an over 40-year track record of providing complete fire protection services for commercial businesses, government buildings and other organizations.

Industry Consolidation

Consolidation activity from PE-backed fire and life safety companies has continued to accelerate, with 129 deals in 2023 and 109 deals through September 2024. With the entry of multiple new large-cap private equity firms into the industry in 2024 (Apax, Blackstone and KKR), the accelerated pace of activity is expected to continue for the foreseeable future.