LAZ Parking Resists Private Equity Lure in Fast-Consolidating Sector

LAZ Parking, a Hartford, Connecticut-based parking operator with USD 2bn in gross revenues, has an ambitious pipeline of acquisitions, president and co-founder Jeffrey Karp told this news service, though it has no plans to become itself a target of private equity’s expansion into the sector.

An active in-house M&A department is considering new acquisitions, with the aim of finding opportunities for cultural alignment, intellectual property and technological innovation as well as geographic expansion, he said.

“We are interested in parking assets that invest in digitization and energy transition. What the customer really wants is a seamless transaction; you don’t want to go into a parking garage, roll down the window, reach for the button, and then your ticket falls to the ground. We want to be able for customers to pull in and have an Uber-like experience,” Karp said, citing a more sophisticated use of automation, data management and hyper-focused advertising.

Technology has been a focus of research and development at the company in the form of LAZ go, a proprietary software developed by a 30-strong in-house tech team, Karp said. The company is slowly morphing into a technology company that manages parking assets, meaning that innovation will be a component of its M&A strategy, he said.

LAZ Parking is keen to expand into Canada, which would be its first venture out of the United States, he said. M&A opportunities would allow faster penetration into bases such as Toronto, Vancouver, Calgary and Montreal, he said. In the US, the company is looking into expanding further into the Pacific Northwest off the recent acquisition of International Parking Management, a Seattle-based parking lot company with USD 21.2m in revenue and 92 employees.

The company finances acquisitions with its own resources, handles debt in a conservative way and maintains low leverage, he said.

The ideal range of targets spans USD 2m to USD 40m EBITDA; tuck-in deals tend to be lower than USD 10m, he said.

“We continue to seek more opportunities and we are having those conversations,” he said.

When pursuing larger deals, the company has retained the services of advisors including Evercore and Morgan Stanley, he noted.

Succession planning

The company’s revenue hit USD 2bn in 2023, marking a 20% year-over-year increase. It hit the USD 1bn milestone in 2020, Karp said.

“In terms of net asset value, we are the most valuable private parking company in North America,” he said, though he added that SP Plus, which was taken private last October by parking technology provider Metropolis Technologies Inc for USD 1.5bn, including debt, could be bigger.

There is consolidation in the market, as parking players scramble to remain competitive in the face of constant disruption brought by technology’s impact both on back-end operations and front-of-house services, he said.

While competitors have succumbed to the allure of private equity buyers or pursued initial public offering, LAZ is committed to remaining private and independent, he said. LAZ has been characterized by management continuity for over 43 years, he said, remaining steadfast in its approach throughout industry disruptions and as regional and national competitors were increasingly sold to private equity.

Last June, Greenbriar Equity Group acquired Towne Park, a leading parking and hospitality solutions provider, from TA Associates. In April 2023, Arkview Capital acquired Icon Parking, a New York City-based parking operator.

“The private equity model acquires, puts leverage, and sees management team walk away with a check,” he said, a modus operandi that he said differs from the very way LAZ itself conducts acquisitions. “We don’t look for the management team to exit, we get behind the acquired company and create moment and provide resources to accelerate growth,” he said.

However, in January 2022 LAZ Parking opened its capital structure to Argo Infrastructure Partners, which he described as an infrastructure fund with a long-term horizon.

Founded in 1981, LAZ Parking grew out of the childhood friendships of Alan Lazowski and Karp, alongside fellow founders Michael Harth and Michael Kuziak, according to its website.

He said Argo became the best candidate as it sought a partner for growth while it considers succession plans for the business.

“We did not want to wake up to disruption, and Argo is a fantastic partner for us,” he said.

With a presence in 469 cities across 42 states, LAZ boasts 15,000 employees, he said.

This piece was originally printed on 4/16/24 on ION Analytics website and can be found here: https://mergermarket.ionanalytics.com/content/1003798335