"This Is Something AI Can't Do"... While Others Flock to Semiconductors and Data Centers, Big Investors Seek Out Goldmines [PE Now]

Global Investors Favor AI and Data Centers,
But Some PEs Target Laundromats, Car Washes, and Funerals
Betting on Everyday Life Beyond the Reach of AI

Private equity (PE) firm Centroid Investment was selected as the preferred bidder last month for the sale of The People Life, a funeral company. The company, which manages prepaid reserves of 400 billion won, ranks sixth in the funeral service industry. Six months earlier, Praxis Capital chose 21gram, a pet funeral service provider, as the first investment destination for its 800 billion won fourth blind fund. In an era when nearly all capital is flowing into artificial intelligence (AI), semiconductors, and data centers, there are PE firms moving in the opposite direction. Their focus is on businesses such as laundromats, car washes, funeral service providers, and pet crematoriums.

Redefining Care and Household Labor... 'Lifestyle Infrastructure Assets'

CleanTopia, the leading laundry franchise in Korea, was acquired by JKL Partners in 2021 and then fully taken over by STIC Investments this past February. Notably, the sales pitch from the seller emphasized a new perspective: With 3,200 franchise locations, the company was positioned in the market as a "Lifestyle Infrastructure Asset." Laundry, as a daily necessity, was redefined as infrastructure—akin to roads or ports—that generates stable cash flows.

This trend first emerged in the United States, where investment targets have expanded to all aspects of daily life, including homes, leisure, and animals. The list of businesses for sale now includes plumbing, roof repair, landscaping, pool maintenance, pest control, and even animal hospitals. According to global market research firm PitchBook, PE transactions in the HVAC (heating, ventilation, and air conditioning) industry surged by 72% year-on-year in 2024, reaching an all-time high, and deals in this sector continued to grow in 2025 despite a slowdown in overall industry M&A. With major asset managers like Apollo and Brookfield joining in, even local plumbers and animal hospitals are being incorporated into Wall Street portfolios.

Korea is experiencing a similar shift. Before CleanTopia, the automatic car wash operator Fire was acquired by JKL Partners for about 80 billion won in 2024, and since the beginning of this year, investment targets have quickly expanded to include pet funerals (21gram) and the funeral service industry. Although opportunities were previously limited due to differences in residential environments compared to the U.S., with more single-person households, dual-income families, and an aging population, new sources of demand are opening up the market.

The Paradox of the AI Era... Capital Flows to the Most Analog Businesses

This phenomenon is driven by two opposing forces: a push and a pull. The push comes from limited investment opportunities as the valuations of AI and deep tech companies soar. The pull comes from what is referred to as "AI defensibility." As one PE fund manager explained, "The more AI spreads, the more businesses that are physical and on-site, or services where trust is essential, stand out for their resistance to automation."

The "AI defensibility" that PE firms are seeking can be summarized in two major aspects. First is the physical, on-site nature of the work. No matter how advanced algorithms become, jobs such as unclogging toilets, repairing roofs, or helping elderly people get up remain difficult to automate. Second is trust dependency. For services like funerals or caregiving, where emotions and responsibility are involved, the ability to entrust a provider becomes more important than mere efficiency.

These criteria align with global institutions' predictions about the labor market. According to the World Economic Forum's "Future of Jobs Report 2025," while the fastest-growing occupation is AI and big data specialist, jobs with the largest net increase are in physical and care work, such as agriculture, delivery, construction, caregiving, and food service. Conversely, jobs disappearing most rapidly are those with highly standardized tasks, such as cashiers, clerical and accounting work, data entry, and customer service (CS). Most of the industries being acquired by PE overlap with those expected to see job growth. Rather than betting on sectors where AI is erasing jobs, capital is flowing into areas where AI ultimately cannot intervene.

The Pros and Cons of the Roll-up Strategy

The profitability is also attractive. The formula is similar: acquire the leading operator in a region or sector to serve as a platform, then buy up smaller, fragmented businesses at 5–8 times EBITDA, scale up, and later sell at a multiple of more than twice the purchase price—a so-called "roll-up" strategy. The more fragmented the market, the cheaper it is to consolidate, and after achieving scale, joint purchasing and technology sharing can further boost profitability.

There are notable examples of roll-ups in this sector in Korea as well. Since 2016, VIG Partners has acquired several funeral service providers, turning Freed Life into the market leader and selling it to Woongjin last year for 883 billion won—realizing more than four times their original investment. During their holding period, prepaid reserves grew from 1.3 trillion won to 2.6 trillion won. Praxis Capital's plan to integrate around 75 independently operated pet funeral homes nationwide follows the same playbook.

Strong demand elasticity ensures at least a minimal cash flow. An investment banking industry source noted, "Funeral, nursing care, laundry, and repair services are markets that cannot be eliminated entirely, even in a recession. Unlike the U.S., Korea lacks large-scale platforms, so there is significant potential for integration and efficiency." He added, "The demand generated by single-person households, an aging society, and 15 million pet owners creates a market that is difficult for AI to replace, and attempts to find opportunities within the automation trend will only increase going forward."

However, the fact that these services are closely linked to daily life can be a double-edged sword. Once efficiency gains from integration reach a certain threshold, what comes next is not efficiency but pricing power. In markets where competitors have dwindled, consolidated operators can raise prices without lowering costs. Users with no alternatives have no choice but to bear their dissatisfaction.

By nature, these lifestyle services are B2C, so a single accident can destroy an entire brand. Sectors dealing with death or caregiving, such as funerals and nursing care, are particularly vulnerable to the public sentiment that "private equity profits from sorrow." Another limitation is that, due to regulatory tightening, it is increasingly difficult to find strategic investors, so exits often depend on sales between PE firms.

This content was produced with the assistance of AI translation services.