Private equity just got told it’s not welcome anymore.
That’s the message from Nexstar Network, a member-owned organization founded in 1992 that supports business growth and professional development for contractors in the residential service industry, particularly in plumbing, heating, cooling, HVAC, and electrical services. br
Julian Scadden, Nexstar’s president and CEO, wrote on Sept. 11 that the group has cut ties with every private equity-backed member, about one-third of its 800 member base. He announced the move on his Substack, calling it a way to protect the group’s mission of helping independent technicians become business owners. Three years ago, he wrote, PE-backed companies made up 10% of Nexstar’s members. That had grown to more than 30%, threatening to crowd out the tradespeople the group was built to serve.
Scadden framed the decision as choosing purpose over profit. “Growth without purpose is cancer,” he wrote. “It spreads. It consumes. It eventually kills the host.”
The decision will cost Nexstar about half its revenue, Scadden disclosed, but will free up its coaches to work with the people who need them most—small operators trying to build their first million-dollar business. He argued that private equity firms, with their actuaries and deep pockets, don’t need the same support as owners still trying to make payroll.
Private equity firms have been moving downmarket for years. In 2022, 60% of U.S. PE-backed firms had 100 or fewer employees, according to a report from Ernst & Young. The median PE-backed company had just 69 employees. These small businesses employed about 12 million workers who earned roughly $1 trillion in wages and benefits.
The trades have become a prime target. Private equity has acquired hundreds of HVAC and plumbing businesses in recent years, often using roll-up strategies to combine dozens of small operators under one brand.
For example, Sila Heating & Air Conditioning has made 28 acquisitions since receiving investment from Morgan Stanley Capital Partners in 2021 (Goldman Sachs Alternatives acquired a majority stake in Sila in Nov. 2024), while FirstCall Mechanical has made 15 buys since private equity firm SkyKnight took control of the plumbing and HVAC company in 2022, according to a study from accounting and advisory firm PKF O’Connor Davies.
Nexstar’s move shows a backlash taking shape. Some in the industry worry that private equity’s hunt for yield is reshaping once-fragmented fields like plumbing and HVAC into consolidated corporate chains. Critics say it can lead to higher prices, job losses and fewer chances for local entrepreneurs. Proponents argue it brings capital, professional systems and growth.
Nexstar is betting that its members want something else. It’s gambling that they value independence more than an eventual sale to a private equity buyer. Whether that bet pays off is uncertain. For owners, selling is often the payday that makes decades of risk worthwhile. Everyone loves the idea of a mom-and-pop shop. Whether mom and pop will continue to stand on principle when it’s time to cash out, is another question.
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