Terminus Capital Partners Takes Majority Stake in Andesa

Terminus Capital Partners, a Denver-based private equity firm, has acquired a majority stake in Andesa, a commercial services platform founded by industry veteran Tom McHenry. The deal marks Terminus's latest platform investment in the fragmented commercial services sector and sets the stage for a potential roll-up strategy targeting regional players across the United States.

Financial terms weren't disclosed, but the transaction represents a classic lower-middle-market platform play — backing an experienced operator with capital and M&A support to consolidate a fragmented industry. McHenry, who founded Andesa and will continue leading the business post-transaction, brings decades of operational experience in building and scaling service companies, making him the kind of founder-CEO PE firms prefer when executing buy-and-build strategies.

What's notable here isn't the deal structure — it's the timing. Commercial services businesses, from facility maintenance to business support operations, have seen steady private equity interest over the past three years as firms hunt for recession-resistant cash flows and consolidation opportunities in industries still dominated by mom-and-pop operators. Terminus is betting that Andesa's existing infrastructure and McHenry's track record create a credible foundation for adding on complementary businesses in a sector where scale drives margin expansion.

The deal comes at a moment when lower-middle-market dealmaking is outpacing larger buyouts, driven by sellers seeking liquidity in a high-rate environment and PE firms finding more attractive entry multiples below the mega-cap tier. Terminus, which typically targets companies with enterprise values between $10 million and $100 million, is playing in a segment where competition is less fierce than the upper mid-market but fragmentation creates genuine value-creation opportunities through consolidation.

Platform investments live or die on two factors: the quality of the existing business and the credibility of the management team to execute add-ons. Andesa appears to check both boxes. The company provides commercial services — the press release doesn't specify whether that's janitorial, facility management, business process outsourcing, or some combination — but the sector itself is attractive for private equity because contracts tend to be recurring, margins improve with scale, and regional competitors rarely have the capital to compete once a PE-backed platform starts consolidating.

McHenry's background matters more than the press release lets on. Founder-led platforms outperform management buyouts in commercial services because the founder typically has deep relationships with customers, suppliers, and potential acquisition targets. They know which competitors are aging out, which markets are underserved, and which operational inefficiencies can be eliminated at scale. PE firms pay for that knowledge — it's harder to hire than capital.

Terminus didn't just buy a services company. They bought an industry map and an operator who knows how to read it. That's the bet. Whether it pays off depends on execution over the next 18 to 24 months as they test the add-on thesis. If Andesa can absorb one or two tuck-ins without operational disruption, the platform thesis holds. If integration bogs down or margins compress, the strategy stalls — and lower-middle-market PE firms don't have the luxury of waiting five years to find out.

The press release notes that Terminus "will provide strategic guidance and resources to support Andesa's continued expansion." In practice, that means access to debt financing for acquisitions, introductions to intermediaries running processes for potential targets, and operational support — HR systems, financial reporting infrastructure, centralized procurement — that smaller companies can't afford to build alone. The value-add isn't subtle. It's the difference between a services company growing organically at 5% annually and a platform adding 30% revenue through M&A while compressing costs.

Commercial services doesn't generate TechCrunch headlines, but it's been a consistent PE target for a reason: the sector is massive, fragmented, and full of aging owners ready to sell. Facility services alone is a $300 billion market in the U.S., with thousands of regional operators serving corporate clients, healthcare facilities, educational institutions, and government agencies. Most of those operators are subscale, family-owned, and lack succession plans. That's the opportunity.

Private equity has been circling this space for years, but the strategies vary. Some firms build national platforms and go public (think ABM Industries or CBRE's services division). Others stay regional and flip to larger sponsors. Terminus appears to be playing the regional consolidation game — acquire a solid platform, add complementary bolt-ons within a 500-mile radius, improve margins through shared infrastructure, then sell to a larger PE firm or strategic buyer in three to five years.

The risk is that commercial services is a people business, and people businesses don't scale like software. Customer concentration can be an issue — lose one major client and revenue drops 20%. Labor costs are rising, especially in markets with tight employment. And integration is harder than it looks on paper. Bolting together three janitorial companies sounds simple until you're managing overlapping customer contracts, incompatible payroll systems, and a newly merged workforce that doesn't trust the new owners.

That table reflects the real diligence questions Terminus had to answer before wiring funds. The commercial services roll-up playbook is well-known. The hard part is executing it in a sector where competitive advantages are operational, not technological, and where the acquirer's ability to retain frontline workers often determines whether the deal creates or destroys value.

If Andesa follows the typical platform trajectory, here's what happens over the next 24 months. First, they stabilize post-transaction — integrating Terminus's financial reporting requirements, upgrading systems, maybe hiring a CFO with PE experience. Then they start screening the market for add-ons: smaller competitors in adjacent geographies or service lines, ideally with $2 million to $10 million in revenue, strong customer relationships, but weak infrastructure. These are businesses that can't afford to invest in technology or compliance but would benefit from being part of a larger platform.

Terminus Capital Partners operates in the lower-middle-market private equity segment, targeting companies with enterprise values typically between $10 million and $100 million. The firm's website describes a focus on "founder-owned businesses in the services, distribution, and niche manufacturing sectors" — exactly the profile Andesa represents. According to PitchBook data, lower-middle-market PE deal volume has remained resilient even as mega-cap buyouts slowed in 2023 and 2024, driven by more realistic seller expectations and continued access to debt financing for smaller transactions.

The firm's bet on Andesa aligns with a broader trend: services businesses with recurring revenue, low capital intensity, and fragmented competitive landscapes are attracting consistent PE interest because they offer downside protection in uncertain macro environments. Unlike venture-backed tech companies or cyclical industrials, a well-run commercial services platform generates cash even in a recession — corporate clients still need their facilities cleaned, their systems maintained, their operations supported.

Terminus didn't disclose whether this investment came from an existing fund or a new vehicle, but the timing is worth noting. Lower-middle-market funds have been one of the few PE segments raising capital relatively smoothly over the past 18 months. Limited partners are wary of paying premium multiples in frothy sectors, but they'll still allocate to funds targeting unsexy, cash-flowing businesses at reasonable entry prices. That's the environment Terminus is operating in — and it's one where disciplined platforms can still generate strong returns if they avoid overpaying and execute on the operational playbook.

What we don't know — because the press release doesn't say — is whether Terminus used a significant amount of leverage on this deal. In lower-middle-market services buyouts, debt typically funds 40% to 60% of the purchase price, depending on cash flow stability and lender appetite. If Andesa has strong EBITDA and minimal customer concentration, it's likely levered. If it's earlier-stage or subscale, Terminus may have used more equity. That capital structure will determine how aggressive they can be with add-ons, since each bolt-on acquisition usually requires incremental debt.

The press release positions this as a partnership, not a takeover. McHenry retains an ownership stake and operational control, with Terminus providing "strategic guidance and resources." That's the standard lower-middle-market PE pitch to founders: we're not replacing you, we're accelerating what you've already built. Whether that's true depends on how aligned the parties are on growth pace, risk tolerance, and exit timeline. Founders often underestimate how quickly PE firms expect to move once capital is deployed.

It's easy to lump all private equity together, but deals like this operate under different constraints than billion-dollar LBOs. Terminus isn't buying Andesa to install a new management team, slash costs, and flip it to a strategic in 18 months. They're buying it to build something bigger over three to five years. That requires a different kind of value creation — less financial engineering, more operational improvement and M&A execution. The founder stays because they're essential to both running the business and identifying acquisition targets. The PE firm provides capital, deal infrastructure, and strategic accountability.

The other difference: exit optionality. A mega-cap buyout has one realistic exit path — sell to another PE firm or go public. A lower-middle-market platform has three: sell to a larger PE firm executing the same roll-up strategy one tier up, sell to a strategic buyer looking to expand geographically, or continue the roll-up independently and sell the scaled business to a late-stage sponsor. Andesa's exit will depend entirely on how much revenue and EBITDA growth they achieve over the next 36 months. If they double the business, they're attractive to anyone. If they grow 20%, the buyer pool narrows significantly.

This transaction is small, quiet, and will never show up on the league tables tracking mega-cap M&A activity. But it's more representative of where private equity is actually deploying capital in 2025 than the headline-grabbing billion-dollar deals. Lower-middle-market platforms in unsexy sectors — commercial services, distribution, niche manufacturing — are getting funded because they offer better risk-adjusted returns than competing for overpriced software assets or growth-stage tech companies.

The macro environment supports this thesis. Interest rates remain elevated, making cheap leverage unavailable for aggressive buyouts. Public market volatility makes IPO exits uncertain. Strategic buyers are cautious, especially in discretionary sectors. In that context, a stable, cash-flowing commercial services business with a credible roll-up plan is exactly the kind of asset that gets financed. It's not exciting, but it's fundable — and in 2025, that matters more than growth narratives.

The deal also reflects a broader truth: private equity's returns are increasingly coming from operational improvement and M&A execution, not multiple expansion. The days of buying at 6x EBITDA and selling at 10x simply because markets went up are over. Firms like Terminus are betting they can buy at 5x, bolt on three acquisitions over two years, improve margins by 200 basis points through shared infrastructure, and sell the combined platform at 7x to a larger sponsor. That's the playbook. Whether it works depends on whether Andesa and McHenry can execute.

We're also seeing more founder-friendly structures in lower-middle-market PE. Founders who sell to mega-cap firms often get completely cashed out and handed a management contract. Founders who sell to lower-middle-market firms like Terminus frequently retain 20% to 40% equity and roll it into the next phase of growth. That aligns incentives better, but it also means founders bear downside risk if the platform strategy fails. McHenry's keeping equity in Andesa suggests he believes the business can scale — or that Terminus made equity rollover a condition of the deal.

The single biggest variable in whether this deal generates strong returns is Andesa's ability to source, execute, and integrate add-on acquisitions. If they can close two to four bolt-ons over the next 24 months — each adding $3 million to $8 million in revenue — they'll build a business worth multiples of what Terminus paid for the initial platform. If they struggle to find targets, overpay for acquisitions, or botch integrations, the platform thesis collapses and Terminus is left holding a slightly larger version of what they started with.

Commercial services roll-ups succeed when the platform has a clear acquisition strategy: target businesses serving the same customer types (so cross-selling opportunities exist), operating in adjacent geographies (so dispatch and management can be consolidated), and offering complementary services (so bundling creates pricing power). They fail when PE firms chase revenue growth without regard for operational fit, leading to a Frankenstein collection of businesses that can't actually be integrated.

What the press release doesn't address — and what will determine whether this deal works — are the structural risks inherent in services roll-ups. Customer concentration is the silent killer: if Andesa derives 30% of revenue from a single client and loses that contract post-acquisition, the equity value can evaporate overnight. Labor market tightness is another issue. Commercial services businesses compete for the same hourly workers as warehouses, retail, and gig economy platforms. If wage pressure accelerates and Andesa can't pass costs through to customers, margins compress and cash flow weakens.

Integration risk is real and often underestimated. Acquiring a competitor sounds simple — buy them, merge the back office, cross-sell services — but in practice, integrating commercial services companies requires harmonizing payroll systems, worker benefits, customer contracts, insurance policies, and operational procedures. It's not plug-and-play. Platforms that rush integration to show quick revenue growth often see customer churn, employee turnover, and quality issues that damage the brand they're trying to build.

There's also the question of whether McHenry has the management bandwidth to run a growing platform while simultaneously sourcing and closing acquisitions. Founder-CEOs are often great operators but lack M&A experience. PE firms provide deal support — investment bankers, accountants, lawyers — but the founder still needs to evaluate cultural fit, retention risk, and operational compatibility. That's a skill set distinct from running the core business, and not every founder can do both simultaneously.

Finally, there's the exit risk. Lower-middle-market platforms often struggle to find buyers if they don't achieve meaningful scale. A $15 million EBITDA business has a clear market of potential acquirers. A $3 million EBITDA business is stuck in no-man's-land — too small for most financial sponsors, too competitive for most strategics. Andesa needs to grow significantly to be attractive to the next buyer. If they don't, Terminus's exit options narrow considerably.

The next phase is predictable if the playbook holds. Andesa will likely announce its first add-on acquisition within six to twelve months — that's the typical timeline for a platform to stabilize post-transaction and begin actively screening targets. Terminus will help source deals through their intermediary network, and McHenry will evaluate which ones make operational sense. The first add-on is critical: if integration goes smoothly, the platform thesis is validated. If it's messy, lenders and future sellers will get nervous.

Simultaneously, Andesa will need to invest in infrastructure. That means upgrading financial reporting systems (PE firms require monthly EBITDA reporting, not just annual tax filings), implementing performance dashboards, and likely hiring a director of M&A or corporate development to manage the pipeline. These aren't optional expenses — they're prerequisites for a credible platform. Founders often underestimate how much operational complexity increases once private equity capital arrives.

By month 18, Terminus and McHenry will have a clear answer: does this platform have legs, or is it a one-off deal with limited scalability? That's when strategic decisions get made — double down with more acquisitions, start preparing for an exit, or recalibrate the strategy if growth is slower than expected. PE timelines are unforgiving. Funds have defined holding periods, and LPs expect exits within three to five years. If Andesa hasn't meaningfully scaled by year three, the exit options shrink and returns compress.

The broader commercial services sector will be watching too. If Andesa executes successfully, expect other PE firms to launch similar platform strategies in adjacent verticals. If it stumbles, the sector narrative shifts and capital flows elsewhere. That's how lower-middle-market PE works — one successful deal inspires a wave of copycats, and one high-profile failure makes an entire sector radioactive for 18 months.

Transactions like this don't move markets, but they reveal where private equity is actually making money in 2025. The mega-cap deals get covered, but the real volume — and often the better returns — happens in the $10 million to $100 million enterprise value range, where fragmented industries offer genuine consolidation opportunities and operational improvements drive value creation. Andesa is one of hundreds of similar platform investments happening this year, each betting that a disciplined roll-up strategy in an unsexy sector will outperform chasing growth in crowded, competitive markets.

For founders considering PE partnerships, the Terminus-Andesa deal is a template worth studying. It's not a full exit — McHenry retains equity and operational control. It's a growth capital partnership where the PE firm provides resources and the founder provides industry expertise and execution. That structure works when interests align but creates tension when timelines or risk appetites diverge. Founders need to understand that accepting PE capital means accepting PE timelines, reporting requirements, and exit expectations.

For investors tracking lower-middle-market PE, this deal confirms that services roll-ups remain a core strategy despite macro headwinds. The thesis is simple: fragmented industries consolidate, platforms generate margin leverage, and the right operator can build a business worth significantly more than the sum of its parts. The execution is harder. We'll know in 18 months whether Andesa proves the thesis or becomes a cautionary tale about roll-ups that look better on paper than in practice.

What's certain is this: Terminus Capital Partners didn't invest in Andesa to hold it indefinitely. They invested to build something bigger, and the clock is already ticking.