Our thesis

Why essential technical services

A working building needs air, water and electricity every day, and it needs someone to look after them. The work repeats: maintenance contracts and service agreements, inspections and checks the law requires on a fixed date, breakdowns that will not wait for the customer’s next investment decision. When budgets tighten, new construction is postponed, but the maintenance of a hospital’s heating plant is not, and neither is the inspection of a factory’s electrical switchboard. It is also a small expense for whoever pays it, set against what it protects, which is why the customer relationship is stable and not very price sensitive. So we look for companies where maintenance weighs more than installation: there, demand depends neither on fashion nor on the property cycle, it depends on the building continuing to work.

The sector is made up of many small companies, almost all of them run by their owner. In 2024, according to INE, there were around 17,900 companies in Portugal in the three trades we came in through, electrical installation, plumbing and air conditioning, employing close to 69,000 people, with combined revenue of around €5.3 billion. That is an average of roughly €294,000 of revenue and fewer than four people per company. There is no national name in this sector. There is no brand a building owner would recognise from Braga to Faro, and the companies with the scale to serve demanding customers well are almost always isolated cases in their own region. It is a sector where scale was never built, not because it was not worth building, but because nobody built it.

A company of thirty people solves almost everything on its own. What it does not solve on its own are the things that only get solved with scale. On its own, it buys worse than a group buys. On its own, it has nobody to handle insurance, financing, systems or recruitment without pulling the owner away from the work he knows how to do. On its own, it has no way to train and keep technicians in a market where technicians are what everyone is short of. And on its own, the day the owner wants to stop is a problem with no solution inside the house. In a group, these things come to exist, and they carry on existing after the owner stops doing them. What does not pass to the group is exactly what makes the company good: the customers, the team, the name above the door and the way of working stay where they are. This is neither our idea nor a new one. In Sweden and in the United Kingdom there are groups that did this for decades in these same trades, with hundreds of family companies bought, each keeping its own name and its own local management, and with very few people at the centre.

The perimeter

The thesis is a single one, and it is broader than the trades pages let on: essential technical services to the building. We came in through air conditioning, electrical and plumbing because that is where the recurrence of the work and the regulatory barrier are clearest, and because you enter one trade at a time. The trades pages cover those three, and those three are what we are looking for today. What defines them is not the trade itself, it is the condition: work the building has to have done, by law or by necessity, done by someone licensed to do it, and done again the following year. What comes after will come for the same reason, and not before the first is properly done.

Why Portugal, and why now

Portugal has around a million and a half companies, and almost all of them are small and family owned. The generation that founded them, mostly between the late nineteen seventies and the nineties, is now reaching the age at which the question can no longer be put off. And in Portugal the answer is usually a bad one. It is not for lack of quality in the companies. It is for lack of a buyer. An owner who wants to settle succession without closing the company, or who wants some liquidity without giving up work, or who has a partner leaving, or children with another life, or everything he owns tied up in a single company, finds three roads today and none of them good: close, sell to the competitor next door, or sell to someone who is already thinking about reselling. Age does not decide this on its own, and there are owners who will carry on working for many years after selling us their company. What demography decides is the number of times this conversation will take place in Portugal over the coming decade, and that number has no parallel in any decade before it.

According to the Livro Branco da Sucessão Empresarial, published by Fundação AEP in 2011, around half of Portuguese family companies do not survive the first transfer between generations, and only around a fifth reach the third.

At this size there are almost no buyers, and the reason is structural. The Portuguese capital market invests a fraction of what the European average invests, and a fund, however willing, has to write bigger cheques than these companies justify and has to tell the owner when it will be selling again, which is the sentence no owner wants to hear. The foreign groups that came into Portugal bought the largest companies in the sector and the neighbouring trades, because that is where their economics work, and we see that competition one or two sizes above where we are looking. The competitor in the next town sometimes buys his neighbour, but he rarely has the capital for it and almost never has the intention to keep it. What is left is the owner of a good company taking calls from intermediaries and never receiving a serious offer from anyone who will stay. That is the place we want to occupy.

In these trades you do not open the door and start working. To carry out installations you need an IMPIC licence, with the right qualification for the work being invoiced. To handle fluorinated gases, which means practically all refrigeration and air conditioning equipment, the company has to be certified under Regulation (EU) 517/2014 and Decreto-Lei 145/2017. For gas installations you have to be registered with DGEG as an installing entity. And on the other side, the maintenance and inspection of a building’s technical systems are themselves written into law, in Decreto-Lei 101-D/2020, in the fire safety regime, and in Lei 52/2018 on the prevention of legionella. None of this is bought in a day. Every credential is attached to certified people the company has to have and to keep, and that is why an established company is worth more than the list of its customers: the right to do the work is itself part of what is bought. It is also why the law, which is a cost to the owner, is protection for whoever is already here.

Documentation

The documentation is not public. It is shared after a conversation and under confidentiality. Pedro Teixeira Duarte, geral@grupocerne.pt, +351 918 330 399.