A Scottsdale-based unicorn company has acquired SMS Assist, a facilities maintenance technology firm headquartered in the Chicago metro in a deal valued at $950 million.
Lessen, a property technology company that connects institutional landlords to service providers, announced the acquisition on Thursday.
Lessen chose to acquire SMS Assist in part for its ability to scale in the repairs and maintenance service sector, allowing the newly combined company to provide customers with a technology-enabled enterprise solution for commercial and residential services, Jay McKee, founder and CEO of Lessen, said.
“We acquired a great management team and a very functional product where they're doing millions of transactions per year. … Secondly, in today's market, there's very much a quest for companies that could be profitable,” McKee said. “When you take our companies and apply synergy to what we can cross-sell and grow with each other — we’re a very profitable business together, which in this market, is very compelling to investors.”
Under the acquisition, Lessen’s customer base, which includes Equity Residential and Invitation Homes, will expand to include more than 250,000 residential and commercial properties. It will fill 2.5 million annual repair and maintenance orders per year.
The new, combined technology platform allows contractors, painters, plumbers, and electricians to act as one, performing work at a national level that was not previously possible, according to a company release.
Lessen’s in-house project managers will oversee and inspect work, helping property owners overcome skilled labor shortages while reducing administrative burdens.
In addition to tapping into a $330 billion national property services market, the acquisition provides Lessen with an opportunity to boost its material sourcing and last-mile logistics capabilities.
McKee will lead the combined company as CEO and serve as chair of its board of directors. Lessen is retaining SMS Assist’s Chicago office, which employs more than 500 people, McKee said.
A majority of SMS Assist’s team will “remain intact” as Lessen is anticipating growth in the next year, he added.
Accelerating growth into commercial
The acquisition brings Lessen's workforce to more than 1,400 employees.
“(The SMS Assist acquisition) has really helped launch our growth into more commercial work,” McKee said. “They were in 50 states, so we have a larger footprint, diversified types of revenue — both residential and commercial — that are giving us areas to really grow wallet share with existing customers and take on a whole new set of customers in 2023.”
The cash and stock transaction involved Lessen raising $500 million in combined new debt and equity financing, in addition to SMS Assist’s stock contributions, which boosted the Scottsdale-based company’s valuation to more than $2 billion.
Debt and equity investors who backed Lessen’s transaction include Monroe Capital, Värde Partners and Koch Real Estate Investments.
“It’s very exciting, and we have customers investing into the platform as well, which is very important,” McKee said. “Customers are signing large checks and five to seven year agreements to use our platform. That's a big deal.”
Lessen reached unicorn status — meaning it has a valuation more than $1 billion — in 2021 after raising $170 million in a series B round led by Fifth Wall with additional participation from Khosla Ventures, General Catalyst and Navitas Capital.
Prior to launching Lessen in 2020, McKee founded Colony American Homes in Scottsdale, a residential real estate company that owned thousands of single-family homes nationwide. Colony merged with Starwood Waypoint Residential Trust in 2015 prior to another merger with Invitation Homes (NYSE: INVH) in 2017.
Although Lessen has reached unicorn valuation, there's no immediate plans to take the company public as its focus is on integrating SMS Assist and growing its customer base, McKee said.
“We're really focused on execution for the next year and then we’ll kind of see how things go,” McKee said. “But, it's exciting having a $2.25 billion business that’s profitable with great employees, a great management team, a great product and great customers. We're going to have a lot of options in the future.”
