The Hidden Billion-Dollar War for America's Electrical Backbone
IRVING, Texas — Gryphon Investors announced today that it has entered into a definitive agreement to sell Shermco Industries to private equity funds affiliated with Blackstone in a transaction valued at approximately $1.6 billion.
The acquisition targets a company that has quietly become essential to America's electrical infrastructure. Founded in 1974 and headquartered in Irving, Texas, Shermco operates as one of the largest electrical testing organizations accredited by the InterNational Electrical Testing Association, deploying more than 600 NETA technicians and 200 engineers across 40 service centers throughout the United States and Canada.
Shermco provides comprehensive electrical system maintenance, repair, testing, commissioning, and engineering services to data centers, utilities, and diversified commercial and industrial clients—partnerships focused on enhancing the safety, reliability, and efficiency of critical electrical infrastructure while minimizing downtime and outages.
The transaction represents a significant return for Gryphon, which made its initial investment in Shermco in June 2018. Under Gryphon's ownership, the company achieved two-fold revenue growth through organic expansion and strategic acquisitions, including operational margin improvements that positioned Shermco as a highly valued partner for its blue-chip customer base.
This private equity handoff occurs at a pivotal moment when America's electrical infrastructure faces unprecedented demands from artificial intelligence deployment and data center expansion, placing companies like Shermco at the center of a broader infrastructure transformation.
The Scarcity Premium
Founded in 1974, Shermco has quietly assembled what amounts to a strategic national asset: more than 600 NETA-certified technicians and 200 engineers distributed across 40 service centers spanning the United States and Canada. In an industry where specialized certification can take years to achieve, this workforce represents a rare concentration of mission-critical expertise.
NETA, the InterNational Electrical Testing Association, establishes rigorous standards for the testing of electrical power equipment and systems. NETA accreditation is important because it certifies that companies and technicians meet these standards, ensuring the safety, reliability, and operational integrity of electrical infrastructure.
The technical barriers to entry are formidable. NETA accreditation requires not just electrical engineering knowledge but specialized training in high-voltage testing, relay protection systems, and commissioning protocols that can mean the difference between reliable power and catastrophic outages. Industry analysts describe the certified technician pipeline as experiencing a "supply chain crisis" of human capital—a scarcity that translates directly into pricing power and competitive moats.
Since Gryphon's initial investment in June 2018, Shermco has doubled its revenue through a combination of organic growth and strategic acquisitions, including the March 2025 acquisition of Power Products and Solutions that doubled the company's service capacity in Charlotte. This expansion reflects the underlying demand dynamics reshaping America's electrical landscape.
The AI Infrastructure Imperative
The transaction occurs against a backdrop of unprecedented electricity consumption growth. The Energy Information Administration projects record U.S. electricity usage in 2025-2026, driven primarily by data center expansion to support artificial intelligence workloads. The International Energy Agency expects data center electricity consumption to nearly double by 2030—a projection that transforms electrical testing and maintenance from routine industrial services into strategic necessities. Forecasted global electricity consumption by data centers, showing the projected surge from AI workloads.
| Year | Total Data Center Electricity Consumption (TWh) | Contribution from AI Workloads (TWh) | Key Insights |
|---|---|---|---|
| 2022 | 460 | Not specified | Data center electricity consumption represented about 2% of global usage. |
| 2024 | ~415 | 10 - 50 (estimated) | Global data center electricity demand is around 1.5% of total consumption. |
| 2026 | >1,000 | Not specified | A significant doubling of energy consumption is forecasted in just four years. |
| 2030 | ~945 | 200 - 900 (projected plausible range of 200-400) | Electricity demand from AI-optimized data centers is projected to more than quadruple by this year. |
For hyperscale data center operators, electrical system reliability isn't merely operational—it's existential. A single substation failure or protection relay malfunction can cascade through thousands of servers, potentially costing millions in lost computational capacity and compromised service agreements. This reality has elevated companies like Shermco from vendors to critical infrastructure partners.
Gryphon's Alex Earls, Partner and Co-Head of the Business Services Group, characterized the achievement as exceptional business building, noting the two-fold revenue growth under the firm's ownership. The success reflects both Shermco's operational execution and the secular tailwinds driving demand for specialized electrical services.
Blackstone's Infrastructure Thesis
For Blackstone, the Shermco acquisition represents a convergence of multiple strategic themes. The firm's broader infrastructure portfolio includes significant investments in energy transition technologies and data center development, creating potential synergies across its holdings. The May 2025 acquisition of TXNM Energy for $11.5 billion demonstrated Blackstone's conviction that rising electricity demand would create value across the power generation and distribution value chain.
The timing reflects sophisticated market positioning. Private credit markets have increasingly financed large buyouts, with direct lenders funding approximately 49% of transactions exceeding $1 billion year-to-date. This financing environment enables sponsors to pursue "real-asset-adjacent" services that offer defensive characteristics amid broader economic uncertainty.
The Consolidation Acceleration
Shermco's sale exemplifies a broader consolidation trend across electrical infrastructure services. The market has witnessed multiple significant transactions in 2025, including Investcorp's sale of RESA Power to Kohlberg in April and various utility acquisitions by strategic buyers. Constellation Energy's $27 billion Calpine acquisition, Vistra's $1.9 billion power generation purchase, and NRG's $12 billion transaction underscore capital's migration toward essential electrical infrastructure. Merger and acquisition (M&A) volume in the U.S. electrical and utility infrastructure sector over the last five years.
| Year | Total Deal Value (USD) | Key Highlights |
|---|---|---|
| 2021 | $53.3 billion | Renewable energy transactions accounted for 32% of the deal value. |
| 2022 | $37.9 billion | M&A activity saw a decrease, with strategic players driving 64% of the deal value. |
| 2023 | $43.3 billion | A rebound in M&A activity was noted after a period of caution in late 2023. |
| 2024 | $29.6 billion | M&A activity continued, setting the stage for a significant increase the following year. |
| 2025 (May YTD) | $77.7 billion | A sharp surge in deal value, primarily driven by two major fossil fuel transactions. |
The pattern extends beyond pure-play utilities. Quanta's acquisition of Cupertino Electric expanded its data center electrical capabilities, while Eaton's purchases of Fibrebond and Resilient Power Systems positioned the company deeper in data center power enclosures and solid-state transformer technologies. These strategic moves collectively signal an industry-wide recognition that electrical infrastructure represents a compounding growth opportunity rather than a mature industrial category.
CEO Phil Petrocelli indicated that Blackstone's partnership would enable continued organic initiatives and additional acquisitions—suggesting the platform strategy remains central to Shermco's growth trajectory.
Investment Implications and Market Dynamics
The transaction's valuation metrics, while not disclosed, likely reflect premium multiples consistent with labor-scarce, mission-critical service assets. Industry comparables suggest enterprise value-to-EBITDA ratios in the mid-to-high teens for similar platforms, justified by recurring revenue characteristics, geographic density, and switching costs inherent in electrical testing relationships.
The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is a valuation multiple used by investors to assess a company's total value against its operational earnings. This metric is useful for comparing companies with different capital structures, and what constitutes a "good" ratio varies significantly by industry.
The skilled labor shortage creates structural pricing power that traditional service industries lack. Certified NETA technicians require extensive training and experience that cannot be rapidly scaled, creating a natural constraint on competitive entry. This dynamic supports both utilization rates and fee escalation across economic cycles.
For equity markets, the transaction validates the investment thesis around electrical infrastructure services. Public companies with similar exposure—including Quanta, Eaton, Hubbell, and Schneider Electric—represent potential beneficiaries of the same demand drivers attracting private capital to the sector.
Risk Factors and Execution Challenges
Despite favorable fundamentals, the integration presents meaningful execution risks. Service businesses depend heavily on key personnel retention, and cultural integration challenges could disrupt customer relationships or operational efficiency. Additionally, the capital-intensive nature of data center development creates potential for demand volatility if economic conditions or technology adoption patterns shift.
Labor inflation represents another consideration. While scarcity supports pricing power, rapid wage growth could compress margins if customers resist corresponding rate increases. The technical nature of the work limits productivity gains through automation, making human capital management central to financial performance.
Safety and quality considerations add operational complexity. Electrical testing involves high-voltage environments where incidents can result in significant liability exposure and customer relationship damage. Maintaining rigorous safety protocols while scaling operations requires continuous investment in training and equipment.
The Infrastructure Renaissance
The Shermco transaction reflects a broader recognition that America's digital economy depends on increasingly sophisticated physical infrastructure. As artificial intelligence drives unprecedented computational demands, the electrical systems supporting data centers become strategic assets rather than commodity services.
This transformation extends beyond immediate transaction dynamics. The convergence of electrification trends, renewable energy integration, and digital infrastructure requirements is creating sustained demand for specialized technical services across multiple industry verticals. Private equity's increasing focus on these "picks and shovels" opportunities suggests continued capital allocation toward essential infrastructure services.
For Blackstone, successful value creation will depend on expanding Shermco's geographic footprint, enhancing service capabilities, and potentially integrating operations with other portfolio companies. The firm's substantial resources and infrastructure expertise position it well to execute this strategy, though returns will ultimately depend on maintaining the operational excellence that attracted the initial investment.
The deal's completion, expected in the coming months, will mark another step in the ongoing transformation of America's electrical infrastructure landscape—where the convergence of digital demand and physical systems creates both unprecedented opportunities and complex execution challenges for investors positioned to navigate this evolving terrain.
NOT INVESTMENT ADVICE