🚾Flush with Opportunity: PE’s Porta-Potty Roll-Up

I was recently at an outdoor concert with friends. The long lines of portable toilets got me wondering–did you know that private equity owns the largest portable toilet company? 

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As much as I don’t envy the workers on the ground, there is a lot to like about the business model:

💰 1. Compelling Unit Economics of Porta-Potty Rental

The fundamental unit economics of a portable toilet rental are compelling, with a quick payback period of ~6 months (defined as how many months of profit it takes to recoup the cost of purchasing the equipment, or in this case, a porta potty). Here is the breakdown:

And based on sensitizing the key inputs (average utilization and gross profit margin), the payback period can range up to over a year, which is still good for a rental business. 

And with a long useful life of ~7+ years, each purchase of porta potties is a very high ROI opportunity.

📈 2. Large Market with Growth Drivers

The U.S. portable toilet industry is worth over $3 billion, per Grand View Research. 

And the portable toilet industry is a beneficiary of many growth drivers such as:

💡 3. Multiple Arbitrage Opportunity

The portable sanitation industry remains highly fragmented outside of the top 5 players, who collectively account for 35% of the market. There are over 3,400 portable toilet rental businesses in the U.S. – mostly small, local operators serving single cities or regions, which is exactly what attracts private equity roll-up strategies. 

Small, single-region portable restroom companies typically trade around 5x–7x EBITDA. Scaled platform companies or prized assets can command double-digit EBITDA multiples in the range of 10x–12x EBITDA. For instance, USS’s enterprise value in 2021 was reportedly around $4 billion, which implied a ~13x multiple.

And the returns math on acquiring tuck-ins is very compelling. For example, for a $5 million revenue add-on, the immediate value accretion could be over 2.5x:

And most obviously, there is no technology disruption risk in this business. Everyone needs to go to the bathroom regardless of advancements in AI.

USS is a textbook roll-up: built via rapid M&A, scaled by four PE firms, and now the dominant national player. But not without its ups-and-downs.

2003-2006 (Odyssey Investment Partners): from Regional to a National Player  

- Odyssey identified the portable sanitation industry as highly fragmented with stable demand from construction and events. Their strategy was to use United Site Services, which was then primarily a New England regional player, to build a national provider through acquisition-driven consolidation.

- While financials are not public, Odyssey reportedly tripled the company’s revenue to over $100 million and quadrupled the company’s EBITDA during the 3 year hold period

2006-2011 (DLJ Merchant Bank): Diversification but Over-Levered

- In mid-2006, DLJ Merchant Banking Partners (an affiliate of Credit Suisse) acquired USS from Odyssey. USS was by then one of the largest portable toilet rental provider in the U.S. 

- DLJ Merchant Banking continued the aggressive roll-up strategy. Notable acquisitions under its ownership included Cascade Phillips (January 2008) – a deal through which USS absorbed seven portable sanitation companies in Oregon and Washington. This gave USS a strong Pacific Northwest foothold

- USS also pursued organic growth by broadening its offerings: by the end of DLJ’s tenure, USS was not only renting porta-potties but also VIP restroom trailers, temporary fencing, roll-off dumpsters, and even providing septic services

- Unfortunately, DLJ’s growth plan was derailed by the late-2000s economic downturn. The 2008–2009 recession caused construction activity (especially the housing construction market) to plummet, straining USS’s revenues and highly leveraged balance sheet

2011-2014 (Blackstone Credit & Angelo Gordon): Creditors Takeover

- Blackstone’s GSO Capital (credit arm) and Angelo, Gordon & Co. (distressed debt investor) became USS’s effective owners through a debt-for-equity recapitalization

- While in financial triage mode, USS was less aggressive on new M&A initially; however, as the construction market recovered in 2012–2013, USS cautiously prepared for an exit to another private equity firm Calera Capital

2014-2017 (Calera Capital): Successful Turnaround Exit

- Calera focused on acquiring regional market leaders to densify USS’s network and enter new territories. Notable acquisitions include the acquisition of Johnny on the Spot, a major portable restroom provider in New Jersey/New York/Pennsylvania previously backed by Balance Point and Dubin Clark 

- Calera’s emphasis was on larger strategic acquisitions that could significantly increase revenue, as well as smaller tuck-ins to fold into existing branches. This aggressive M&A strategy, combined with steady recovery in construction markets, helped double USS’s revenue within a few years, ultimately leading to a $1 billion sale to Platinum Equity.

2017-Current (Platinum Equity): Massive Continuation Fund, But Recent Struggles

- Platinum Equity immediately focused on aggressive add-on acquisitions, including:

- By late 2021, USS’s annual EBITDA exceeded $300 million, reflecting both strong organic growth and acquisition. In 2021, the company announced a continuation fund deal where a new set of investors (but still managed by Platinum Equity) acquired the business for $4 billion, reflecting a 4x+ return from the 2017 acquisition from Calera

- However, in recent years, USS has faced liquidity challenges and financial headwinds, driven by a slowdown in construction activity amid rising interest rates. Additionally, certain COVID-era tailwinds—like the surge in demand for handwashing stations—have faded, revealing that even seemingly essential services can prove discretionary post-pandemic.

The portable toilet playbook has remained a relatively under-the-radar industrial services private equity play, despite having started over two decades ago.

But given the boom-and-bust cycle (that is highly indexed to construction volume) that we have witnessed with the USS case study, it is not surprising that this playbook has not become a mainstream one.

However, some private equity firms are viewing the current trough in construction markets as an opportunity. Notably, RF Investments has launched its own portable toilet rollup platform ProSite Services in late 2024, with its most recent acquisition done just a couple months ago.

There is money in unsexy businesses, and porta-potties are definitely one of the more unsexy businesses out there.

Fyi, there’s an incredibly detailed breakdown of the economics of owning a porta-potty business on Reddit, if anyone is interested.

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