In a recent LinkedIn post, Lee McCabe explores the often-overlooked opportunities within unglamorous industries for private equity investment, arguing that true value creation lies in ignoring market trends and focusing on solid economics. McCabe highlights a case study from the early 2010s involving a pest control business to illustrate his point.
The Allure of the Unglamorous Business
McCabe contrasts the perception of industries like pest control with more traditionally favored sectors such as software or healthcare. He notes the initial hesitations many investors have towards businesses that lack a “disruptive” narrative or a flashy product. In his post, McCabe writes:
“Pest control. Low tech. Fragmented market. Service trucks. Route density. Recurring customers. A category serious people tend to ignore until they find something moving in the kitchen.”
This description underscores the inherent challenges and perceptions that lead many in the investment world to dismiss such opportunities. McCabe details how numerous private equity firms passed on the pest control business, deeming it “too boring,” “too operational,” or “too local.” The lack of a “sexy brand” or a clear “macro tailwind” also contributed to this reluctance.
The Hidden Value in Operational Excellence
Despite the superficial bear case, McCabe argues that the very lack of glamour is often where the best opportunities hide. The core investment thesis, as he lays it out, was straightforward and focused on fundamental business principles rather than fleeting trends.
A Strategy of Consolidation and Professionalization
According to McCabe, the strategy involved acquiring a solid platform business and then systematically growing it through acquisitions of smaller competitors. Key to this approach were operational improvements:
- Adding branches
- Tightening delivery routes
- Improving customer retention
- Professionalizing operations
- Rolling up smaller competitors
McCabe emphasizes that scale matters significantly in fragmented industries like pest control. He points out the irony that while the private equity industry claims to seek proprietary insights, many overlook compounding opportunities simply because the business lacks superficial appeal.
“That was the obvious bear case. No real technology edge. No sexy brand. No grand macro tailwind you could put on slide 6 and nod at. Just a regional operator in an industry known for fragmentation and recurring demand rather than glamour.”
The Unconventional Path to High Returns
The outcome of this investment strategy, McCabe reveals, was exceptionally positive. The pest control business evolved into one of the most successful roll-up returns of its decade. This success, he asserts, was not due to market fashion but to the underlying economics that were underestimated by the broader investment community.
“But it was also exactly the sort of ugly little business that can become extremely beautiful once somebody stops being embarrassed by it.”
McCabe concludes by highlighting a core paradox in private equity: the pursuit of unique insights often leads investors away from the very businesses that offer the most reliable compounding growth. As he puts it:
“That is the joke with private equity. Everyone says they want proprietary insight. Then half the market walks past the compounding machine because it has bugs in the logo.”
Lee McCabe’s analysis serves as a reminder that value can be found in the most unexpected places, often by those willing to look beyond superficial appeal and focus on the fundamental drivers of business success.
📝 About This Content
This article is based on insights shared by Lee McCabe on LinkedIn.
📅 Originally posted on May 28, 2026 | View original post on LinkedIn →