The Small Businesses Private Equity Is Missing | Hudson Lewis
Key Takeaways
- Hudson Lewis targets profitable small businesses generating between $1 million and $5 million in annual revenue that are typically overlooked by traditional private equity firms.
- The investment strategy focuses on acquiring essential local service businesses such as HVAC, pest control, plumbing, electrical, dental, and veterinary practices.
- Before implementing advanced technologies or artificial intelligence, Hudson Lewis prioritizes fixing foundational operational inefficiencies like tribal knowledge reliance and manual workflows.
- By systematically acquiring and aggregating multiple smaller companies in the same sector, the firm builds larger platforms that become highly attractive to private equity acquirers.
- Real-world operational upgrades, such as modernizing technology and standardizing systems, have previously driven significant revenue and capacity expansion in acquired businesses.
In this episode of Family Office Investing Podcast & Investor Insights | Arthur's Round Table, Arthur Bavelas sits down with Janae Rapps, Deanna Brown, and Kristina Hutchison-Burdette of Hudson Lewis to explore an overlooked segment of the American economy:
Profitable small businesses that are too small for traditional private equity—but potentially too valuable to ignore.
Hudson Lewis is building an investment strategy around acquiring controlling interests in established, cash-flowing businesses, improving their operations, introducing technology and AI where appropriate, and ultimately combining multiple companies into larger platforms that may become attractive acquisition targets for private equity.
The businesses they are targeting aren't speculative startups.
They're companies already serving real communities:
• HVAC businesses
• Pest control companies
• Plumbing and electrical businesses
• Roofing companies
• Bookkeepers and CPAs
• Dental practices
• Veterinary practices
• Chiropractors
• Other essential local service businesses
These companies often have customers, recurring revenue, positive cash flow, and decades of operating history.
What many don't have is the technology, processes, operational systems, management bandwidth, or strategic capital required to reach the next stage of growth.
That is where Hudson Lewis sees the opportunity.
Hudson Lewis doesn't view AI as something that should simply be dropped into a company because it is fashionable.
Kristina explains that many small businesses first need their foundations fixed.
Some still rely heavily on tribal knowledge. Important processes may live entirely in one person's head. Customer communications may flow through individual cell phones. Operations may depend on spreadsheets and manual workflows.
The first job is therefore to identify where the business is leaking capacity, wasting time, or operating inefficiently.
Only then does AI become useful.
Deanna describes AI broadly—not just as generative AI, but as workflow automation, knowledge libraries, and eventually agentic tools that can help businesses standardize processes and scale more efficiently.
Janae brings a real-world example.
While managing a dental practice, she helped acquire older practices that had not modernized their technology or operating systems. After upgrading processes and systems, the business expanded from one location to six. In some practices, she says revenue increased four- to fivefold.
The team sees a similar opportunity across fragmented small-business sectors today.
Their thesis is straightforward:
Buy profitable businesses that are stuck.
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Improve operations and systems.
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Use technology and AI to expand capacity and margins.
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Acquire additional businesses in the same sector.
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Aggregate them into a larger platform.
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Create an asset large enough to become relevant to private equity.
This matters because Hudson Lewis believes many companies with roughly $1 million to $5 million in annual revenue sit below the size at which traditional private equity is actively shopping. Individually they may be too small. Combined, they can become much more interesting.
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Frequently Asked Questions
What types of small businesses does Hudson Lewis target for acquisition?
Hudson Lewis targets established, cash-flowing local service businesses with $1 million to $5 million in annual revenue, including HVAC, plumbing, roofing, electrical, pest control, dental, and veterinary practices.
Why do traditional private equity firms miss these smaller businesses?
Traditional private equity firms typically shop for larger targets, leaving companies with lower revenue thresholds too small for their standard investment criteria and deal sizes.
How does Hudson Lewis use AI and technology in acquired small businesses?
The firm first fixes foundational operational issues and eliminates manual workflows before introducing workflow automation, knowledge libraries, and AI tools to expand capacity and improve margins.
What is the ultimate investment thesis for Hudson Lewis?
Their thesis is to buy profitable stuck businesses, improve their operations using technology, aggregate multiple companies within the same sector into a larger platform, and create an asset attractive to private equity.
