Acquisition structure and why owners stay

Steve Carroll is the CEO & co-founder of Kelso Industries, a national MEP services platform uniting HVAC, mechanical, plumbing, and electrical companies.

In just a few years, Kelso went from a gritty, nearly-broke first acquisition to 29 acquisitions and $1B+ in revenue.
Steve breaks down the bruises and the blueprint: why their first year almost killed the business (including a single job that wiped out a year of profit), the switch from “buy and replace” to a partner-and-keep-the-owner model, how they finance growth without overpaying, and the operating system (recruiting, cash, WIP discipline) that lets local brands scale without losing their soul.

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Timestamps
00:00 Intro
00:34 Steve’s background
01:56 Early thesis: from marketing & home services lead gen to HVAC focus
03:54 Bootstrapping experiments, agencies, pest control—what worked/what didn’t
04:58 Personal runway & the real cost of chasing deals while employed
06:00 Broken deals, travel, and swallowing $100k–$200k before first close
06:16 Meet the co-founder: lifelong friend Steve Nicholson; Kelso name origin
08:32 First near-deal dies; deciding to swing at the largest SBA-sized deal
10:26 Finding a commercial HVAC business in Arizona
13:11 Sponsor: CapitalPad
18:23 Survival year: no new acquisitions, just fixing ops and cash
19:13 The unlock: partnering with an Idaho operator who stays on, not exits
20:21 Bringing in a PE partner (Peterson Partners): why working capital blew up the SBA plan
24:26 How the PE check actually changed things (and what it didn’t)
28:29 Sponsor: SpaceBar Studios
29:32 Scale after deal #2: ~$40–50M revenue; raising the bar to $30–40M targets
30:50 Handing Arizona to Poncho so Steve can live on planes finding partners
33:22 Hitting $10M EBITDA in 2 years and setting the $1B revenue goal
34:32 Reaching $1B TTM four years after launch
36:25 Structure: Kelso buys 100%, owners stay, roll equity, 3-year earnouts
37:48 Why this is a relationship business (and why replacing owners destroys value)
43:10 Liquidity: horizon to public markets or new capital partner—patient equity model
46:59 Building the corporate engine: legal, HR, recruiting (15 in-house), finance, insurance
49:06 Project businesses need WIP discipline; dashboards and tighter forecasting
49:57 Footprint today
51:05 Centralized cash & working capital management
52:36 Post-close uplift: many ops 2–3x EBITDA with branch and service expansion
54:27 Financing new deals mostly via lenders + internal cash; no overpaying
56:24 Succession planning at every level; why this creates employee confidence
59:42 Example: ex-owner now building Kelso’s national service platform
1:01:10 Why Kelso hasn’t sold any companies (and likely won’t)
1:02:58 Steve’s evolving role: firing himself from jobs, hiring an exec team

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