Minnesota Rusco’s Cautionary Tale
When you turn to a local newscast, it’s hard to miss the ads from home services companies. They advertise like crazy, and most of them imply they’re locally owned.
Minnesota Rusco was a long-standing remodeler that few knew until it began advertising all over TV with a distinctive jingle (“We’re Minnesota Rusco, since 1955”) along with youthful brothers Cody and Casey Rusco, the new faces of the business.
What viewers didn’t know was that, as of 2022, the Rusco family no longer owned the business. It sold the New Hope-based company that provided window replacements and bath and kitchen remodeling to a private equity firm. In October, Rusco announced its closure. A week later, bankruptcy.
Renovo Home Partners, a national home remodeling platform backed by private equity, acquired Rusco in 2022; this past fall, Renovo filed for Chapter 7 liquidation.
Private equity firms invest in every business sector in America, but they’ve become especially fond of home services. Andy Lindus, owner of Lindus Construction, a Baldwin, Wisconsin-based contractor who serves the Twin Cities, says many local companies are currently working to sell to private equity, just as Rusco did.
Multiple times a week, PE firms approach home services businesses with deals that are going to be able to “set them up for generational wealth,” Lindus explains, adding that often the owner “jumps at the dollars.” This can prompt competitors to sell as well because they believe they can’t compete with private equity’s deep pockets and resources, says Aseem Kaul, a professor at the University of Minnesota’s Carlson School of Management.
Multiple times a week, PE firms approach home services businesses with deals that are going to be able to “set them up for generational wealth.”
—Andy Lindus, Owner, Lindus Construction
Private equity likes home services because it offers predictable, recurring demand that holds up during economic downturns, according to Lindus. It views home services as a growth business. PE offers sellers more resources, suggesting it will improve “inefficient” operations. If a subset of the home services businesses that PE buys can improve earnings substantially, “those are good odds in the eyes of a PE investor, even if the rest fail,” Kaul explains.
Kaul says companies like Renovo may shift to an outside company for support functions, reducing local headcount and creating economies of scale.
If growth ensues, Lindus says PE attempts to “flip” their home services companies to another PE firm.
Private equity isn’t going to spend years trying to understand a local market or small company. Which, he says, often eliminates the very qualities that made the business successful.
