Private Equity Finds a New Source of Profit: Volunteer Fire Departments

Summary

The Norfolk Volunteer Fire Department operates on an annual budget of $132,000, barely enough to sustain its aging rigs, train unpaid crews and keep the lights on at the station in the hills of northern Connecticut.Not long ago, it faced a different kind of emergency: The software system it relied on to track detailed incident information was no longer going to be usable. A company backed by private equity investors, ESO Solutions, had acquired the platform and planned to shut it down. The alternative software it was offering would raise the community’s costs from $795 per year to more than $5,000.Urgently looking for an alternative, the department found a cheaper system, but then ESO bought up the other brand. It left the department in a bind. “We don’t have a big tax base,” said Matthew Ludwig, an assistant fire chief in Norfolk. “We have to watch our pennies.”Much of the software used by firefighters and other emergency responders was initially created by people who worked in those fields and felt a calling to keep prices affordable. But now fire chiefs around the country are scrambling to manage shrinking options and soaring costs as corporations flush with cash from Wall Street have raced to dominate the market.Volunteer fire departments, which make up 85 percent of the roughly 30,000 departments in the country, have been particularly strained.ESO, backed by the private equity firm Vista Equity Partners, is one of many companies aggressively investing in public safety systems, where tax dollars provide a steady source of revenue. Some of the companies have come to dominate the supply of fire engines, emergency radios and fire retardant, among other vital products — with fire and police agencies objecting to the sharply rising costs.Eric Beck, the chief executive officer at ESO, who once worked as a volunteer firefighter himself, said the company had acquired several software businesses that were on an unsustainable footing and needed investments or pricing adju...