Hi all - we’ve explored vertical integrations in hockey and horses. This week, we’re back to horizontal rollup programming (but with a twist).
I sit at an interesting vantage point these days, since I interact with VC-backed AI-native holdcos in addition to traditional PE/indy sponsor rollups. In this week’s article, we’ll touch on a traditional outsourcing industry that’s facing AI disruption.
Separately, if you'd like to stay updated on upcoming RTC events, including dinners, conferences (we have a big one coming your way…), and future AI sessions, subscribe to our Luma calendar!
Before we dive into this week’s topic,
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State of Play
In June 2024, Accurate Background bought Orange Tree Employment Screening, a MN-based background check company, from Tonka Bay (a LMM PE firm based in…you guessed it, MN). The same month, General Atlantic and Stone Point closed a ~$1.7 billion take-private of HireRight. Four months later, First Advantage (the largest public player) closed its ~$2.2 billion purchase of Sterling (another top player).
PE hasn't stopped buying since.
- HireRight bought ClearChecks,
- A&M Capital bought Asurint, and
- Audax's DISA bought TEAM Companies this July.
But the competition isn't just other roll-ups anymore. For example, Checkr, an AI-first screener founded in 2014, did $800 million+ of gross revenue last year and is valued at $5 billion. Yardstik, a Minneapolis startup (what’s up with MN and background checks?!), just raised $30 million on ~150% revenue growth.
So is buying up traditional background screeners still a long-term PE thesis when the new competition is AI?
Let's dive in.
