Pictet Alternative Advisors will use a buy-and-build strategy to increase Pareto’s geographic coverage in a UK facilities management market that is growing from increased sustainability needs, Edmund Buckley, head of direct private equity, told PE Hub Europe.
Pictet invested in Pareto FM, a technical and facilities services provider to the built environment, in late 2023. London-based Pareto offers operational, maintenance and management services in buildings across the UK and globally. The investment is the first by Pictet’s new direct private equity team.
“It’s an exciting time in the real estate industry and there’s a lot of disruptive change,” said Buckley. “People who have got the technical capacity in-house are very well positioned to benefit from that wave.”
Building owners globally are having to think through tough questions around sustainability, embedded carbon and energy efficiency, Buckley explained.
Pictet plans to increase Pareto’s geographic coverage and technical capacity via M&A. A core element of the strategy is to acquire subcontractors, something that the business has done successfully before, according to Buckley. “We have quite an ambitious goal of doing it by buy-and-build; acquiring small companies that we can bring on to our platform, therefore offering better services to clients,” he added.
The firm aims to invest heavily in developing more technology and software, as well as buying businesses that can help Pareto up its focus on energy efficiency.
The geographic expansion will stay within the UK. “The overall hard FM market in the UK is probably £20 billion ($25 billion; €23 billion)-£30 billion-plus of annual expenditure, with decent, around 5 percent growth,” said Buckley. “It is also very fragmented.”
At least half of the expenditure in the facilities management sector is driven by legal statutory requirements from the UK government, according to Buckley, who added that another 35-40 percent is driven by business-critical infrastructure needs.
Deploying Pictet’s first direct PE fund is a key part of the agenda for the next three to four years. Being part of a broader financial services institution – one where the core business is in private wealth management – is a “unique edge” that differentiates the team from others, Buckley said. “We get a lot of interesting dealflow through the broader Pictet network and ecosystem.”
The new team still has to navigate the tough economic backdrop which has caused transaction volume in the last 12 months to drop “dramatically”, according to Buckley. “When you talk to advisers, you hear about transactions being put on hold,” he said. “There are a lot of mandates being awarded but fewer sales processes are being launched. People are waiting and seeing.”
The waiting and seeing will have to come to an end, eventually. “While I think 2024 will be a complicated economic environment to navigate, I think the green shoots of more transaction volume will start coming through,” said Buckley. “Founders and entrepreneurs who want capital and new partners can’t really wait. Private equity firms will have to start selling businesses because they have assets getting past their hold-by date.”