APi Group: Safety Services at Scale - [Business Breakdowns, EP.205]

51 snips

Jan 29, 2025

Guest

Chadd Garcia

Guest

Adam Wyden

In this discussion, Adam Wyden, founder of ADW Capital, and Chadd Garcia, a portfolio manager at Ave Maria Mutual Funds, dive deep into the transformation of APi Group. They highlight the company’s shift from one-off construction projects to a thriving recurring revenue model, emphasizing the value of strategic acquisitions. The guests explore the empowering employee ownership culture at APi and how it drives engagement and growth. They also analyze the impact of the Chubb acquisition on fire safety services and the broader implications of market dynamics on investments.

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INSIGHT

Recurring Revenue Model

API Group's safety services division focuses on recurring revenue through inspections, leading to high-margin repair work.
This contrasts with competitors who primarily target large, one-off projects.

ANECDOTE

Boston Acquisition Transformation

API acquired a Boston-based company run by two brothers, initially focused on large projects with 7% EBITDA margins.
Post-acquisition, API shifted the business to a service-first model, doubling revenue and achieving 14% EBITDA margins.

INSIGHT

API Group's Unique Culture

API Group's culture fosters employee ownership and entrepreneurialism, originating from an ESOP created by Lee Anderson.
The company's decentralized model and cross-functional leadership program allows individuals to transition between divisions, promoting growth and internal competition.

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This is Zack Fuss. Today, we are breaking down APi Group, a leading provider of life safety and specialty services to buildings and construction projects. While not necessarily a household name, APi's services play a vital role in the buildings where we live and work.

With over 100 acquisitions under their belt, they've strategically built a business that exceeds a billion dollars in EBITDA and sports a market cap exceeding $10 billion dollars. The evolution of the business has come via an intentional shift from one-off construction projects to a recurring revenue model, generating a steady stream of income by providing essential services like inspections and maintenance of fire systems, elevators, security cameras, and more.

To help us break down APi, I am joined by Adam Wyden and Chadd Garcia. Adam is the founder and portfolio manager of ADW Capital, and Chadd is a portfolio manager at Ave Maria Mutual Funds. Chadd and Adam will share their insights on the company's competitive advantage and go to market strategy, including its unique decentralized management structure and its strong culture.

Please enjoy this breakdown of APi Group.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com).

Show Notes

(00:00:00) Learn about Finley

(00:05:34) Overview of API Group's Business

(00:08:54) Specialty Services Division

(00:10:59) API Group's Financial Profile and Growth

(00:17:18) Company Culture and Management Structure

(00:23:12) Capital Allocation and Strategic Acquisitions

(00:29:37) Understanding Stock Gains and Share Issuance

(00:30:51) SPACs and Martin Franklin's Reputation

(00:31:19) Challenges and Successes in Acquisitions

(00:32:55) Focus on Inspection and Service Work

(00:35:04) The Chubb Acquisition and Its Impact

(00:37:10) Financial Profile and Capital Allocation

(00:42:09) Valuation and Market Perception

(00:46:47) Lessons from API Group Investment