Private Equity

Navigating the Evolving Landscape of Private Equity: Insights from the 12th Annual Private Equity Two-Step Conference

At the 12th Annual Private Equity Two-Step Conference held on May 21, 2025, in San Antonio, Jason Brown, Managing Partner of PGP Advisory, moderated a panel discussion focused on one of the most dynamic sectors in the market: specialty subcontractors. This $879 billion industry is foundational to commercial and residential construction, and its evolution offers unique opportunities and challenges for investors.

The Panel Lineup

Jason was joined by two industry experts: Jason Hartman, Principal at PGIM Private Capital and Brandon Upp, Vice President at Main Street Capital Corporation.

Together, they offered deep insights into the key value drivers, credit considerations, and operational factors shaping performance in this highly fragmented and essential sector.

Key Takeaways from the Discussion

1. Value Drivers in the Subcontractor Space
   The panelists explored how recurring revenue, specialization, geographic reach, and strong relationships with general contractors and developers significantly increase a company’s attractiveness to investors. Businesses that operate with operational discipline and have well-documented safety and compliance protocols were seen as especially valuable.

2. Credit Considerations and Risk Assessment
   Subcontractor businesses often deal with extended payment cycles and rising input costs, both of which present risks from a lender’s perspective. Hartman and Upp emphasized the importance of assessing working capital needs and balance sheet flexibility when evaluating creditworthiness in this industry.

3. Macroeconomic Pressures and Margin Management
   The discussion turned to how inflation, labor shortages, and supply chain disruptions are impacting margins. Despite these challenges, many firms are adapting through automation, better cost forecasting, and diversification of suppliers and services.

4. Exit Strategies and M&A Trends
   With strong interest from private equity and strategic buyers, subcontractors are seeing increased M&A activity. The panelists pointed out that the sector’s fragmentation makes it ripe for consolidation, with regional roll-ups and platform plays becoming more common.

5. Operational Excellence as a Value Creator
   All three panelists agreed that operational excellence—including investment in people, technology, and process—continues to separate top-performing subcontractors from the rest. This focus on execution enhances scalability and long-term value.

PGP Advisory’s Perspective

Jason Brown brought his extensive transaction experience and strategic advisory insight to the conversation, guiding the panel through real-world scenarios and asking pointed questions about risk, timing, and opportunity in the lower middle market. As Managing Partner of PGP Advisory, a San Antonio-based M&A advisory firm, Jason specializes in helping business owners and investors maximize value throughout the business lifecycle.

Conclusion

The Specialty Subcontractor panel offered attendees a deep dive into a critical and often overlooked segment of the private equity market. As this $879B industry continues to grow and evolve, staying ahead of trends in valuation, credit, and operations will be essential for both investors and business owners.

Click here to view the full panel discussion.

For additional insights or to explore opportunities in the lower middle market, contact PGP Advisory.