Nexstar Network parts ways with private equity 

Nexstar Network, the 33-year-old HVAC, plumbing, and electrical-focused coaching and training group, is parting ways with its private equity-backed members. 

State of play: Just three years ago, private equity-backed contractors represented 10 percent of Nexstar’s membership base. 

• Today, that figure sits at 33 percent, with those members accounting for 50 percent of the organization’s revenue, CEO Julian Scadden noted in a blog post.

What they’re saying: “Every business has a core mission,” Scadden wrote. “For us, it’s serving the underdog. The skilled tech in a van who dreams of owning a fleet.” 

• But over time, “We got so good at growing companies that we attracted buyers who didn’t need us,” he continued. “Our mission was being hijacked by our success.”

What’s happening: A range of private equity-backed platforms have built in-house training programs, which have ultimately diluted Nexstar’s purpose for those contractors, Scadden explained. And the vibe at the organization’s events had shifted. 

• “Look, these are still good people,” Scadden tells Homepros in an email, referring to the sprawling universe of private equity folks. “Many of them are friends.”
• “But our events are sacred spaces where a plumber with fifty employees needs to feel comfortable sharing their biggest fears,” he adds. 
• “That dynamic changes when there’s someone in the room backed by a $500 million fund. It’s nobody’s fault. It’s just reality.”

Zoom in: While admitting it was a tough decision, “Our focus has to remain on the technician turned business person with a handful of trucks, who’s trying to figure out how to make payroll next week while still being home for dinner,” Scadden says. 

• “But I also just want to say that I do not have any negative feelings about the members who became PE-backed,” he adds.  
• “I strongly believe they deserve the windfalls and investments they placed in their businesses, which is why it’s time for them to move on and let someone else benefit from what they did.”

Of note: By the end of this year, all private equity-backed members will have their memberships “respectfully sunset,” Scadden tells Homepros.

• There will be no grandfathering, and no one associated with private equity will be able to attend future events. “We’re not trying to be punitive,” he says, “but we have to be consistent with our decision.”

Between the lines: Nexstar is also not “splitting hairs,” according to Scadden, clarifying that the decision applies to contractors backed by institutional capital — “whether that’s a local investment firm or Blackstone.”

Why now? The move follows an internal assessment, which concluded that a 33 percent, private equity-backed membership base doesn’t align with its mission. “The decision was reached using the same basic business formula we advise for our own members,” Scadden says.

• “If any part of your business is not part of your core competency, or if your business model starts to grow beyond 10 percent, it either needs to become its own business, or it needs to be stopped because it will become a distraction,” he adds.

The intrigue: While private equity-backed members will be phased out by the end of this year, they’ll be able to remain in Nexstar’s buying group, which Scadden describes as “open to the public.”

• “Many of our PE-backed members are choosing to remain in that program as they transition from full membership,” he says. 

Follow the money: Nexstar’s revenue isn’t publicly disclosed, though Scadden wrote that the organization can weather a 50 percent cut because it’s “maintained an investment reserve.”

• “This foresight lets us avoid laying people off… It even lets us hire more,” he added, noting that the move also enables resource reallocation. 
• “The coaches who were teaching millionaires how to make millions can now focus on teaching technicians how to make their first million.”

What’s next: Wrapping up his post, “We just freed up space for the people who need us most,” Scadden wrote. “The skilled tradesperson with calloused hands and big dreams. The technician who knows there’s more to life than trading hours for dollars… That’s who we’re here for.”

Disclosure: Nexstar has been a recent advertising partner of Homepros.