Technological Advances, Code Updates, and Emerging Trends With John Mackey
Host Drew Slocum speaks with John Mackey of The Mackey Group about the state of the fire protection industry, NFPA, passing the torch to the younger generation, and what the future looks like in fire protection. How does data play an increasingly important role in ensuring the safety of our communities and buildings? How can the fire protection industry act faster to keep up with technological advances? Find out on this episode of The Fire Protection Podcast.
As the conversation unfolds, John sheds light on the evolving role of data in enhancing community and building safety. With data-driven approaches becoming increasingly integral, listeners gain valuable insights into how harnessing data analytics can revolutionize fire protection strategies, ensuring more effective risk mitigation and emergency response.
Furthermore, the episode goes into the imperative for the industry to adapt swiftly to technological advancements. Drew and John examine the challenges and opportunities posed by emerging technologies, offering practical perspectives on how stakeholders can leverage innovation to bolster the efficacy and efficiency of fire protection measures.
Tune in to this compelling episode of The Fire Protection Podcast to uncover the pivotal role of data in safeguarding our communities, and to explore strategies for staying ahead in a rapidly evolving technological landscape within the fire protection industry. Join us as we navigate the complexities and possibilities of this vital sector, shaping the safety and resilience of our built environment.
- 00:06: Intro
- 02:57: John Mackey’s podcast
- 04:30: Big moves for businesses in fire protection
- 11:54: PFAS
- 15:53: Hazards and emerging companies
- 16:30: Environmentally friendly chemicals
- 17:55 Takeaways from the recent Potter conference
- 23:41: Security’s relevance to fire protection
- 30:20: Security maintenance/ requirements
- 32:16: Prediction on cycle of finances
- 34:48: Purchasing contractors
- 39:00: Industry changes in the near future
- 41:35: Get to know your buyers/understand expectations
- 45:39: Conclusion
Full Transcript
Drew Slocum:
This is episode 59 of the Fire Protection Podcast, powered by Inspect Point. Today, my guest is John Mackey of the Mackey Group. John’s a recurring guest on the podcast, obviously a mentor of mine in the past. We worked together, and even beyond that at our Tyco days, try to have him on every year, every six months or so, just to discuss the market in general, what’s happening within fire protection industry, both from the manufacturer’s point of view to what’s happening there, as well as the service providers and the contractors, and kind of what’s happening beyond that. So yeah, it was good to catch up and kind of hit those topics, what 2024 is going to look like. It’s still strong with obviously some of the consolidation on the contractor side as well as some, interestingly, on the opposite side and the OEM, it’s more, I don’t say fragmentation, but the bigger companies getting breaking off those chunks. So it’s kind of the flip or vice versa on that side. So good to have John and catch up with him on the podcast. And yeah, please like and subscribe to the podcast. Thanks.
Hey, John, what’s happening?
John Mackey:
What’s happening, Drew? How are you? It’s been a little bit, I haven’t seen you in person in a while. We do talk quite often, but yeah, the last time I saw you face-to-face was probably in Chicago. The last time we did one of these podcasts. And thank you for being on my platform. I’ll just tease it here, but I do have a series of podcasts coming out. I recorded at the Fire Suppression Systems Association conference a few weeks back, so we’re cleaning those up and getting them ready to come out. But from an overarching perspective, we did a series of walk-and-talk interviews on the golf course with four different people. So getting those ready too.
Drew Slocum:
Did you video their shots too?
John Mackey:
I did.
Drew Slocum:
Oh, man.
John Mackey:
There’s some trash-talking. Some teams can really put. And some teams…
Drew Slocum:
Yeah, right. That’s funny.
John Mackey:
But yeah, I interviewed Louis Gonzalez with Standard Fluids, Todd Stevens with IFP, Scott Sherman with TG Norwalk out of Fort Wayne, and then our friend Cliff Hartford.
And so just like CBS does on their broadcast for golf, it was walking a hole and asking questions and talking golf and talking about talking to the industry and talking about the Fire Suppression Systems Association.
Drew Slocum:
Good. Great idea. I look forward to that. Let me know when they’re out. Have any of them come out yet?
John Mackey:
Not yet. We’ll be wrapping up the package, as you know, and hopefully start dropping ’em next week, do a series over the next four weeks.
Drew Slocum:
Well, I guess we’ve talked on yours, almost a year ago now. I like doing this every so often with you just to really kind of see what’s going on within the fire protection, and I’m going to add the security industry to this. I know we’ll probably get into that. I guess it’s been a year, right? So what has happened either recently in your mind or over the last year that’s kind of poked out in the fire protection industry of kind of big moves?
John Mackey:
Yeah. Well, I think from an overarching perspective, the consolidation game continues, right? Still a number of deals out there. Summit, Pye Barker.
Kidde Fenwal announced that they were acquired by a PE firm out of California. I don’t want to butcher their name, so I’ll leave it at that for now. But it’s part of the restructuring the carrier announced a year or two ago about where the fire portfolio sits in the broader context of the carrier business. So about three weeks ago, four weeks ago, the specialty detection and suppression aspect of Kidde, which included a couple different detection lines and some others were spun off and acquired by somebody. And then this week they announced Kidde Fenwal being acquired by another company. The price was pretty low. I thought it went for $140 million. I’m sure there’s a number of things behind the scenes that we don’t know. That was what was publicly announced and the deal, which is crazy. The reason I say that is because I think of the history of Kidde. I mean, the Kidde brand has been in fire protection since the 1920s, and you look at just the legacy, see the old systems that are still out there, especially in the marine space, I think, I mean still today, probably one of the industry leaders.
Drew Slocum:
Exactly.
John Mackey:
And now in a position that they have to be sold, I would say at a discounted level. So hopefully it gives Kidde Fenwal an opportunity to reestablish their footing and figure out how they’re going to get back into the game. Still an iconic brand, some really good people over there, and hopefully with a new sponsor, if you will, they can figure things out.
Drew Slocum:
So that’s the specialty. I always think of specialty suppression. But is that also big in the extinguisher front with Kidde and Badger and all that?
John Mackey:
All we got to figure out. I think that there’s so many different brands in that portfolio. When they made this announcement, they just said Kidde Fenwal. So I’m not sure if it’s capturing some of the legacy stuff from the national foam aspect to things. I’m not sure where Kidde residential sprinklers, irks and residential fire extinguishers fit in that, or is that completely separate altogether? The other portion that’s still out there is the Kidde fire and security portfolio. So where do the fire extinguishers fit? Where does Edwards EST fit in that?
Drew Slocum:
Detectors, you can get at Home Depot, right?
John Mackey:
Yeah. Is that still Kidde or is that BRK? I mean first alert, I don’t know too many moving parts and pieces, but at the end of the day, to me it highlights, okay, carrier made this announcement a few years ago, and it’s part of the journey that UTC with the previous owner of Carrier was on. So they restructured and kind of now we have what carrier Kidde, and now Kidde is kind of moving on a similar journey to what we saw with Ansel to Tyco. You and I were together at Tyco through all that, integrating the fire business. And then sooner or later or sooner, then JCI gets in the fold. Sure. And so now you’ve got a JCI big building technologies platform who then gets in the fire space. So it’s interesting to see the evolution of the big iconic brands and what’s happening. A number of folks that we know, both at Kidde that we worked with at some point, and while specifically Tyco, a lot of those folks aren’t there anymore.
And that’s the sad thing and somewhat concerning because where do they go? Where do they end up? How many were we able to retain in fire? How many left the industry as a whole? And it really affects their business as it relates to their ability to lead and product development, lead in getting support to their customers and end users. But I think it also opens the door for some of these up and comers that we see, look at the strengths and growth of Amerex and what Amerex has done in the last seven years. Yeah, it’s great. That’s great. Best in class manufacturing processes, a well-rounded sales team led by Ben Pitts and really, really close with their distribution. So really what Amerex is going on, you look at the growth over at Janus, you and I worked with Tim Carmen and Steve Pier and Jeff to Temple and Derek Hughes when we’re back at Ansel Tyco.
And Janice has a lot of good stuff going on. Has retooled really focused on bringing some new products to market, which is exciting. They’ve got a new product called Fight Blue that they announced about six months ago focused on lithium ion protection. I saw the lithium stuff. Yeah, battery protection. So still a lot to learn about Fight blue, but hey, I’d like to see innovation, someone trying to do something. Yeah, there’s a problem hazard. Exactly. Yeah, exactly. SIBO and what Sibos got going on with regards to really unique systems. They’re in the power gen with their Titan systems. I don’t think anyone else has big, big bottles and the ability to push juice as far as they can, and also with their partner IFP and what Todd Stevens is doing with hanger protection and battery,
Drew Slocum:
That’s another problem where you have this foam problem, the PFAS and P four problems. So they’re putting something out there that’s new and innovative. It just takes time to adopt,
John Mackey:
Especially in our industry. How long were you part of NFPA 25? You’re back on there now, aren’t you?
Drew Slocum :
I’ve never been officially. I’m officially on their technical committee, but obviously followed it over the years. And I’ve made some LinkedIn recently
Drew Slocum:
Just the length of time it takes to make decisions and I get why it takes so long. I don’t know if I fully agree with it, but yeah, it’s a fun process to be a part of it. And honestly, that’s why we have a business too, so I can’t fault it.
John Mackey:
No, and obviously talked about this for a long time, but I think that we need that next generation of leaders, the next generation of technicians, that next generation of engineers to get involved to influence the codes, to write the code. Because let’s go back to the evolution of N FPA A 25. You had people on the committee, and they’re probably still there. They’d been on committee for 20 years, came in the technical committee and worked their way all the way to the chair. And so it’s time to pass the torch and let the next generation come in and start to redirect why we needed that code to line up with technology to line up with the hazard, to line up with environmental issues, to line up with customer expectations and what have you. And to your point, we need to do it faster because revising the code every three years doesn’t necessarily make a significant change because in three years you can’t shift the needle, I think fast enough.
Drew Slocum:
And they have to, A lot of decisions. I got into this discussion yesterday with somebody about just data and making you need data to make decisions. And I think a lot of codes were developed 20, 30, 40 years ago from industry experts and they had experience in the field, but they were, I don’t want to say picking numbers and decisions out of the air, it’s just their experience. We didn’t have any data and a way to bring it all in together. But there’s data now to do that. And they’ve done that. NFPA 25 changed their dry head testing requirements. They seem to test them every time, but that’s all coming from data on testing that equipment. So I think they just need to do more of that. And they were on track to try to gather a lot more data, but it’s tough to wrangle everybody up.
John Mackey:
Well, I think it’s kind of stalled a little bit too, right? I haven’t heard anything about it. N FPA is coming up here in a couple of weeks, so a couple months now, two months away. But where are we at with NFPA nine 50 and 9 51, right? One is data collection and the other one is data reporting.
Drew Slocum:
I talk to HJS all the time. They don’t even know what I’m talking about when I mention it.
John Mackey:
Well, let’s go back to where we were five years ago when you and I were talking about NFS PA nine 15. No one knew what we were talking about. Man. That thing came through fast, almost as fast as NFP 8 55.
Drew Slocum:
Yeah, it was fast. I mean, that helped it, but I don’t know if it’s fully being, obviously being talked about. But that’s taken time because the hjs have to adopt it,
John Mackey:
Which is different. So it’s now just a local municipality. Municipality. So it’s right. It’s going to take some time. But so you look at the challenges that we have with hazards and some of these new companies, they’re not, shouldn’t say new Janis Fike and SIBO have been around for 20 years each, but maybe fike longer than that. But you look at their growth and the opportunity they have. So you look at the big iconic brands being Insulin Kit have the foundation’s a little wobbly right now. And so these brands have the opportunity as well as Amex to go get it. And they’re showing that they’re going after it, which is exciting to see. You made a reference to PFAS and PFOS and PF oa. You and I could do a series of podcasts on that, but we do have to find something. Eight FF has a legacy issue with regard to the chemistry and the impact it’s having on our soil and water around the country, around the world. And so we need to transition off of that, replace those systems with more environmentally friendly solutions, and as an industry stay in front of the PFAS conversation because there is good PFAS out there that we need in our everyday life.
Drew Slocum:
Yeah, exactly.
John Mackey:
The devices we’re talking about have PFAS. Our cell phones have PFAS at the FSA conference. The chairperson for the PAS task force that I’m also on for the association made a comment that BMW can’t build a car if you ban all PFAS. Well, because it’s in the plastics, it’s in the electronics, it’s in everything. So let’s really understand what that looks like before we just do this arbitrary ban across all products. So I’ll put a pin in that conversation right there because we can talk about PFAS forever. Yeah, go forever.
Drew Slocum:
I know we mentioned a lot of suppression sprinklers. I know you went to the, and we were there as well. We went to the Potter conference and Honeywell just had theirs as well. But any takeaways from that?
John Mackey:
So the Potter Conference, that was the first time I’d been to the Potter Conference. I was there with a couple clients and really, really impressed A couple of things that Potter’s done recently. And this is all under the umbrella of Jerry Connolly’s leadership, and Jerry’s a long-term fire guy. He’s been in the space for about 25 years and has worked his way up. Formerly, I think he was a presidential kid at one point. And so ironic. So a couple of things happened with Potter back in the fall. They were acquired by KKR, one of the biggest PE firms in the world, in the top five. And it’s really allowed Potter to solidify their foundation as it relates to where we are going right now. They’ve got a big checkbook. And then after they had one but didn’t have a small checkbook before, they were owned by a nice PE firm Griffin, who also owned Hughes. So somebody who understands the industry, but KKR comes in and buys it. And what it allows Potter to do now is really transform how they run their business. So my key takeaways from the conference one, they hired the VP of sales from Honeywell, Vic Bauer
To run sales for Potter and Dick. We all do ACE 20 years plus in the industry, really built around relationships with the contractors, the engineers, and solving their problem. So what do you need in the system? How can we create better products? How can we get products to you faster? Et cetera, et cetera, et. So it was Dick’s first sales meeting or first conference to be at. So it was good to see him in the Potter shirt. Sure. They hired Shelly dpu, who used to be at Kidde now the head of Potter’s, BDA and DA products. Oh, okay. Called Tower iq.
Yeah. So it’s interesting. So why is Potter in the BDA game, right? That’s just a rhetorical question. Don’t need to answer that.
Drew Slocum:
It kind of makes sense. I mean, because fire alarm, it’s an interesting kind of sub-sector of fire alarm or it’s not even fire alarm, it’s more radio. But if you’re in the building working on the fire alarm system, why are you not doing this, this, and this?
John Mackey:
Yeah, right. All right. So now you can start to integrate across the life safety systems in the building. And then what my biggest takeaway from the thing, we hit some key things, but I think the other thing was Sean Hackett, who’s the sprinkler cards right in front of me.
Drew Slocum:
Sean Hassett. Yeah, yeah. Sean
John Mackey:
Sean Heke, president of the Sprinkler Monitoring Division talked about in his little presentation about how Potter is going to leverage technology to make sprinkler systems smart. How do you get it plugged into the alarm system? How do you communicate broader to an inspection platform like yours? Plug it in their switch into Inspect Point to do an inspection at two o’clock in the morning.
Drew Slocum:
Exactly.
John Mackey:
And challenge the contractors that were in the room to change their business model to align with the merger of technology and sprinkler, because you don’t necessarily have to deploy tech anymore because of N FFA nine 15. So again, it’s going to take some time. And it doesn’t necessarily mean that you’ll never deploy a technician. No, you still need to put a person on a job site
Drew Slocum:
And they’re doing that. It’s got to nine 15, just a template for the AHJ, but then 25 and 72 and the other ones, the other inspection maintenance standards have to have that in there. And the HJ has got to be okay with it, so there’s stuff to do, but it needs to happen. And again, the data’s going to show that without gathering the data, you’re not going to be able to make that decision.
John Mackey:
So it was really interesting to hear Sean talk about that. And it was in the room really. It wasn’t a directive, it was a challenge. And it was a challenge. It was alright, start opening your mind about what your business model is today and be prepared to change it because the change is coming not fast. We don’t move fast as we talked about earlier, but it’s coming. So it’s interesting and I think it’s exciting to see these developing, evolving brands. And they’ve been here for, like I said earlier, 25 years being Potter and Janice and Fike and Amex and sibo, but they’re trying to carve new paths because of the icons. They’ve kind of moved to the sidelines as they deal with their internal issues. And here we go.
Drew Slocum:
Yeah. Yeah. It’s exciting. It’s interesting. And you brought up the Potter conference and I am pretty close with the team there. They did make another, obviously they brought on Tower iq, I think it was like three or four years ago at this point. But they also have this product called Valcom now that is more on the security side. It’s more emergency evacuation cameras, integrating some obviously security camera networks and all that.
John Mackey:
Mass notification type of stuff.
Drew Slocum:
Mass notification. So obviously you see that blend of security and you’ve seen that obviously personally on security, getting into fire or fire, getting into security. I guess, what do you see more? Do you see security companies getting into fire or the vice versa where fire companies are like, all right, let’s start to get into the security side.
John Mackey:
I think it’s interesting, right? So let’s go back where we were 10, 12 years ago. A DT at the time was the largest residential security provider. That’s why Tyco bought ’em. We were there. Yeah, I remember that.
And I remember being in meetings with the ADT folks, Hanani, who was the CEO of ADT at the time, and I was running the integration of TCO fire under Colleen. And I asked him, I said, where does a ADT fit in the fire space? And he basically said, it’s not our core strength. We know security, we know it inside and now, but fire’s just a little bit different. And even look where they’re at today. ADT got spun out, they’re on their own. Their
But now they’re trying to figure out as a security space evolves, where’s the fire piece fit for ADT? Let them solve that problem. And I share that example because let’s flip it, right? The opportunity for consolidation and where security fits, I think is more active on the fire side today, especially from an acquisition perspective. Totally. Because the financial performance of the businesses are similar. You’ve got recurring, they call it RMR, the security side, but recurring monitoring generates revenue differently than our service contracts generate revenue as we deploy technicians to go do monthly, quarterly work. Sure. So you’ve got that piece first. Secondly, we’re already inside the fire alarm panel doing alarm work, right? More than likely that here’s a fire alarm panel right next to the security panel, right? So low voltage, low voltage, pretty simple devices, just making sure everything’s connected and tested.
So we do see, I see a lot of consolidation in that space where you’ve got fire alarm contractors buying security contractors, pi Barkers doing it. They’ve got a history of over the last three years, rapid fire, another company I’m very familiar with, they’re doing the same in the markets that they’re acquiring. So you have that path. Is it a large national play like we see with A DT? I don’t think so. Convergence, trying to do it to convergence security then coming over, but they haven’t been able to figure out security into fire. I think the play is fire and security. The differences in the market is where it kind of gets somewhat, well, it does get somewhat disconnected because as you know, NFP is driving fire codes on what we’re supposed to do for the alarm system, fire alarm system. You don’t have that rigor on security. The insurance companies mandate what needs to be in there. The business owners are trying to protect their assets that are inside the facility or the building or whatever. But you don’t have mandates?
Drew Slocum:
No, there’s no AHJ on the security side really. No.
John Mackey:
Right. No. Other than make sure if you dispatch police that it’s for the right call and give us the information we need. Not different than you dispatch a fire truck at two o’clock in the morning to make sure it’s a real call. But I do see from a financial perspective, a business perspective so that it makes sense,
Drew Slocum:
Matches up.
John Mackey:
And I think it will continue because again, the consolidation game has been going on for 35 years and a couple of different ways to do it, it’s either all OEMs or contractors or a blend. And now and before it was traditional SPR or just traditional alarm or traditional suppression. Now it’s everyone coming together. So sure. I do think there’s a long opportunity to integrate more security into the fire space.
Drew Slocum:
Yeah, it’s interesting. The needs are obviously different. We’ve obviously been exploring it and just because obviously fire, fire companies get into security and even security ones that want to break into fire. And how do they do that, right? Well, you need the fire acumen to be able to really get into the fire space. And it’s a team, it’s technicians, obviously it’s at the core, but it’s also managers and back office people that know it too.
John Mackey:
The analogy I used with somebody the other day was that March Madness started yesterday, right? Didn’t do a bracket this year, so it didn’t get busted.
Drew Slocum:
Night. Yeah, same.
John Mackey:
Too busy. Fire alarm. I’m a right-handed guy. So a fire alarm guys, you’re dribbling the ball and you’re shooting and everything is right-handed, and then you get the alarm guys or security guys that come in,
Drew Slocum:
Right?
John Mackey:
It just doesn’t blend until you find the right, like you said, the right manager, the right person that’s able to crossover, if you will, from that right-handed fire alarm side to the left-handed security side to really understand that market, that business follow through on that basketball analogy, how does that basket look from the left-hand side versus the right hand side? So it can be done, it takes time. It’s not a plug and play type model just because the codes and standard are different, the language is different. How you get the work done is different, but the results are still the same because it’s still about RMR and returning revenue.
Drew Slocum:
And it’s nice. And obviously that’s attractive. Part of it is monitoring recurring revenue. But even though I’ve talked to some security companies, once they install something, no. I mean best practice is to put a maintenance contract in to make sure everything is properly working and cameras operate key card access, whatever. But there’s no code around that. And that’s nice about fire. But if you can do that on the security side and kind of have almost that model set up, it’s going to work really well. You’re already in the building. So grabbing all those pieces of that building management system in the fire system and security system is, well, it only makes sense with the consolidation happening. It’s just how do you do that? And I don’t know, there’s obviously been some successful companies doing it, but it’s probably more regional and local, right? Absolutely. It’s not at the national level,
John Mackey:
Not different than fire. The codes for security, or excuse me, the licensing and the requirements for security are very state or municipal municipality specific.
John Mackey:
It’s different than fire. So to scale that across a region, one, I can do that in a state, I can scale across a region, but now I’m going to try to scale it across 48 contiguous states. No, because it’s not the same. And I think that’s the barrier that most of these companies have. But I think opportunities are there and you buy ’em and you figure out, okay, let’s go cross sell. And now if I buy a security company, I’m going to take a look at those customers and say, how am I going to sell ’em? Fire alarm versus,
Drew Slocum:
Yeah, exactly. Right.
John Mackey:
And vice versa. Take that fire alarm company, you go buy a security company, how am I going to sell those security customers more work?
Drew Slocum:
What’s your prediction on, and I won’t hold you to this, what’s your prediction on, we’re on a cycle of consolidation right now, and I think another part of it moving into security, there’s not as many fire companies to buy up. Either consolidation is happening, you see some fragmentation here or there, but nothing too crazy. What’s that cycle? Look at the peak? And that probably translates with some of the, weirdly enough, you thought with the Fed interest rate, it’d be slower. Acquisition’s been super strong still, even with higher interest rates.
John Mackey:
So a couple of things. First, to your point about interest rates, as the PE guys should say, there is so much dry powder, so much cash that’s sitting on the sidelines, not in banks, not in the stock market just waiting to be spent.
John Mackey:
So because the cash is there, they don’t have to go to the bank to take debt to make the acquisition. So stroking a check for a million, 2 million, 10 million can be done fairly easily, right?
Drew Slocum:
Yeah. That makes sense.
John Mackey:
You’ve got that financial aspect. Longer term, as you make more acquisitions financially, you do want to leverage some debt against the business because that’s just being a savvy financial investor. But on the front end, you can, in most deals that are going down today, you can stroke and check for the deal because we’re not buying the companies that are selling. The company is stroking a check for over a hundred million dollars to buy somebody. Those platforms are off the table right now for the most part. Right? Summit Pye, like I said, Pye did 31 deals last year, which is insane, but a lot of ’em were just small little tuck-ins in their existing security. Security, Pureplay, sprinkler, they bought a guy down here in Mobile, Alabama, SNS. They bought Cotter throughout Texas.
Drew Slocum:
That was a big one though.
John Mackey:
That’s a big one. So you look at that, but even with, let’s go back even with Pie’s activity last year, Summit’s activity, rapid fire, I mean pick all the buyers. So in that context, I’ll use Rapid Fire as an example. Rapid Fire has been up and running for about 14, 15 months at this point and just closed on their 11th deal. So you look at them and you look at Pie, who’s been doing the buy sell game for on and off for 20 years, but it had been buying on this buy spree since 2015 ish to about seven to nine years ago. So all said and done with all the companies that pi, I say Pye is up to 185 offices, I think maybe 200 depending on how many deals they’ve had this year. Even in that regard, as you know, there are still contractors.
Drew Slocum:
Thousands. Thousands. Yeah. Right.
John Mackey:
If you run the math back to 2014 and assume that Summit’s done a hundred deals or 150 deals, Pye has done a hundred or 150 deals and everybody else in between,
Drew Slocum:
Right?
John Mackey:
We are still holding on somewhere between 10 and 12,000 contractors. Oh yeah. And I say 12,000, that’s your number. And I say 10,000 because that’s mine.
Drew Slocum:
I think it’s higher than that, but in writing it’s that, right? Yes. I guess it’s on the podcast now.
John Mackey:
And so what happens is that, okay, yeah. The big platforms aren’t going to trade as often as they were before they came together. So now it’s just these regional guys or these local guys and tuck ’em into these regional players. And that’s where we were in 2014, and I think that’s getting ready to start over again, right?
Drew Slocum:
You think so? How?
John Mackey:
Yeah. Because everybody that’s been watching what Summit and Pye and the big buyers have been doing are saying, all right, let’s go down to the next tier, lower tier, and let’s start again. Small PE firm buys five or six guys and sells a platform of 50 million, sells it to the midsize guy and mid-size guy takes it to 200. So 200 million. And then there we go.
Drew Slocum:
Yeah, it’s kind of, sorry. There are a bunch of them now, and I do see a lot of newer companies coming along, but it’s just not as fast. When does fragmentation happen? A little bit faster. I think it may come once the newer generations get some years under them and they want to do their own thing, right, because they have the power and the knowledge.
John Mackey:
Exactly. And they’re willing to take that risk. You’re not willing to take that risk when you’re 25 and you’re trying to figure out how you’re going to buy a truck and get married, buy that first house. Yeah. Now you’re 35 years old. Okay, got some foundational pieces behind me, know the industry. I can do this right?
Drew Slocum:
I can do it now.
John Mackey:
So I think it’s healthy. Yeah. Do you have to turn over a lot more rocks to find the good deals? Yes. To be a little bit more diligent in your process? Yes. But they’re still there. There’s still some good deals that are, it’s good. It’s exciting.
Drew Slocum:
- And even with the coming election, I don’t think it’s going to slow anything down. I think it’s going to obviously keep on trucking even. Obviously we see that with rates now, so being so high and still the activities pretty high and fire protection is not becoming less compliant. There’s more compliance complexity as rigor as we move forward. So yeah, it’s been a lot of fun. And we should probably do this maybe sooner than a year, maybe at the end of 24 instead.
John Mackey:
Oh, I think there’s some mega deals coming down the pipe. We are going to see some things that are kind, I wouldn’t say surprises, but okay. Because there are still companies that perform really well and in some cases deserve to be paid, but multiples still exist.
Drew Slocum:
They do.
John Mackey:
Yeah.
Drew Slocum:
It’s still there. I think there would’ve been a dip and there wasn’t really a dip or there was a dip, but it’s back up. Maybe not to the peak, but,,,
John Mackey:
Yeah, I don’t think we’re ever going to question ever.
Drew Slocum:
Right.
John Mackey:
In the next 10 years. We won’t be where we were in 2020 and 2021. No, I mean sheer number of deals, A lot of the platforms all traded hands and the money that was coming in behind that
Drew Slocum:
Money was cheap too.
John Mackey:
Exactly. Right. So that’s the high water I felt last year where we were like 2016, 2017, it’s a little quieter. Everyone’s just kind of chipping away and buying all these little tuck-ins. And I think that that’s the mode we’re going to be in this year. You’re going to see a couple of platforms trade, which will kind of tip the number up a little higher than we were in 16, 17. So I don’t see us getting back to 21, but I think we could be where we were in 18 to 19, which was pretty steady.
Drew Slocum:
It was still a great time.
John Mackey:
Yeah. So it’s good. What I told contractor owners that are trying to figure out what their transition is, explore it, but explore it on your terms. Do your homework, get an evaluation for your business. Understand what your business is worth.
Drew Slocum:
Yes.
John Mackey:
That analyst industry expert will tell you, here are the five things that you need to do to tighten things up. Where’s your service revenue? Can you break out your customers? Can you break out your markets? Understand how your business performs, and ultimately it’s a reflection of ebitda. So tighten up that EBITDA number and then does the number align with what you’re looking for in an exit? And if so, then, okay, let’s figure out what that process looks like to bring you to market. And I’d also say, and some of the buyer friends of mine that I know would always take no offense, except me saying this, but I’ve told the sellers or anyone, any owner, don’t take the first phone call you get from one of the big platforms. Get to know who the buying groups are, understand how they operate their business, understand what their expectations are of you in whatever role you may have.
Drew Slocum:
Yeah, exactly.
John Mackey:
Understand what they’re going to do with your brand, understand what they’re going to do with your trucks and understand what they’re going to do with your employees and your customers. And also go back and interview the people that have sold companies to them in the past.
Drew Slocum:
That aren’t currently involved.
John Mackey:
That aren’t currently involved. Because understand how deals went down, understand that. Did they hold up and do what they said they were going to do and how they treat you and your employees? Yeah,
Drew Slocum:
Exactly.
John Mackey:
It was all said and done, because bigger isn’t always better. Again, look at the size of Kita and what’s going on now. Look at the size of when we were Tyco and what’s going on now. And back to our point earlier in this podcast, you see these mid-size companies in the OE EMM space who are really starting to carve a new path. And I’m going to make the same point that the companies that are doing something different on the contractor space and the consolidation game are carving a new path. It’s structured differently. They manage how they engage in those markets differently. They’re going to focus on integrating your offices within the first six months of a deal closing versus not integrating at all. And so understand all that and don’t necessarily take the first call that comes across your desk or when that m and a guy slides a number across and says, well, you want to sell your business for this.
Drew Slocum:
There’s other people out there, so do your research. Plenty. Yeah, do your research, talk to people. I’ve helped friends and colleagues in the past, just I’m an independent source too. It’s just like, all right, hey, this is what you should be doing, but these are the top three things they’re going to be looking for. And don’t get wide-eyed over a dollar number. See what it means for you guys and your family and to your employees, obviously.
John Mackey:
Yeah, great. Good stuff. It is. It’s fascinating times. We didn’t get into this, but I think personally my business, I don’t think I’ve ever been busier. That’s good. With regards to the phone calls I’m getting on a daily basis, the projects that I’m getting asked to be a part of trying to manage across numerous clients, it’s a good problem to have growth, but it also chalk that up to the health of the industry and the strength of the industry and where we’re at. Every contractor is busy. Every contractor, for the most part, if they want to grow their business, can grow their business
Drew Slocum:
If they want. Have the labor to do it right.
John Mackey:
And then every owner that’s looking for a transition can find that off ramp.
Drew Slocum:
Oh yeah, they’re there.
John Mackey:
Just got to network, talk to people, figure out what that path looks like, and put a process in place to explore it.
Drew Slocum:
No, it’s good. It’s exciting to see from when you broke away on your own and that whole thing that was probably scary and exciting and all in one. All in one fell swoop. And to see you today doing what you’re doing and excelling at that, it’s great to see.
John Mackey:
Well, thank you. It’s been over a year, or excuse me, over four years now. This is the start, my fifth. Oh yeah. But not when I started with one client one month later, COVID hit.
Drew Slocum:
Yeah.
John Mackey:
Yeah, I remember that. And it was like, oh my. What just happened. But anything else, and I talked about this with how we support each other with our businesses, but it’s keeping open-minded. How do you pivot? How do you figure out whether the next opportunity, the niche that you did in your case, develop a solution for your customer base to solve for x? I’ve gotten more open-minded to the things I do in the fire protection space. And my client base today is some buy-side companies helping them figure out how to buy, working with companies to figure out how to get ready to sell, grow, raise capital. I’m working with a couple OEMs on the equipment side with regard to how they position their business for growth and what’s next. And then even on the fluid side, advising the guys over at the standard fluids with regard to their business. So a lot of different aspects of the business that the industry as a whole versus just one aspect of it. Yeah,
Drew Slocum:
Diversified. You’re diversified within fire protection. I like that.
John Mackey:
The sandbox is only so big, but I found all the corners. Yeah.
Drew Slocum:
Yeah, right.
John Mackey:
So that’s good stuff.
Drew Slocum:
Where can everybody find you?
John Mackey:
The Mackey Group is the company’s name. mackeygroupllc.com is the website and phone call at any time, (251) 270-8901 and then find me on LinkedIn, find me in at all the conferences, you name it. I try to make myself as accessible as possible.
Drew Slocum:
Great. Great. Well thanks again, John. I’ll see you in NAFED in a few weeks here.
John Mackey:
And we’ve got to find some time to golf. You and I have not golfed in a while.
Drew Slocum:
It’s been, I think Las Vegas is last time.
John Mackey:
Yeah. I busted out my kista hat for St. Pat’s weekend because four leaves Clover on it. Oh yeah. The live lucky. And everyone’s like, like I got a story. Oh yeah. So yeah, we’ve just got to figure out what that looks like.
Drew Slocum:
Yeah, totally.
John Mackey:
Alright man. Great talking to, good chatting. I’ll see you soon.
Drew Slocum:
Sounds good.
John Mackey:
Alright, thanks.
Drew Slocum:
This was episode 59 of the Fire Protection Podcast, powered by Inspect Point. I want to thank John Mackey again for coming on and having a nice in-depth discussion of what’s happening through the industry. And yeah, look forward to obviously getting some more of these out, maybe doing a live one at some of the events coming up this spring. So we’ll see you again soon.
