If you are in the industry – you know all about consolidating HVAC market – highly fragmented, aging ownership, constrained labor pool, and plenty of private-equity and strategic buyers. This isn’t new news. Throw in a changing home environment (think electrification, heat pumps, solar and battery) and you have a strong case for a consolidating market – with plenty of value for both buyer and seller.
There are over 140,000 HVAC businesses in the U.S. in 2023 and that’s up 4-5% consistently over the past 5 years. So, there is no shortage of acquisition opportunities – but if you are thinking about exiting or selling your company now or in the near term – here is what the buyers are looking for:
- Platform vs bolt-ons: Most strategic and private equity buyers (typically willing to pay higher multiples) are looking for a minimum of $5-10MM in revenue to acquire a new company in a new region. A bolt on (or a tuck-in) is in the $2-5MM range and just means the buyer already has a business in the area and can fold yours in easier. Of course, platforms get higher multiples of EBITDA than bolt-ons do, so if you are close but not quite there yet, factor that into your exit planning.
- Multiple traits get better value: HVAC is the focal point in the consolidation, but if you offer plumbing and electrical services, that will increase the value of the offer. The more touch points with the customer, the better.
- Having a solid GM is a plus, but not a necessity: Finding good leadership and talent is tough, so if you have strong management in place, folks that a new owner could rely on, that makes the process smoother. So, training your team with an exit in mind is a good idea.
- Residential vs commercial, it’s a coin toss: In our experience, residential HVAC companies want to buy residential HVAC companies and commercial buys commercial. Not a surprise, but if you have a mix of both (or New Construction vs traditional service), this might impact the type of buyer you can attract.
- No substitute for a well-run business: Buyer’s recognize intrinsic value, how you train your staff, how you keep your books, how you manage your Gross Profit margin and Costs. Strong business fundamentals still matter – and attract higher quality buyers and offers.
The good news is – there is plenty of activity. The market is consolidating, and buyers want good companies. So don’t worry if you aren’t exactly where you think you should be. We can assist in developing a plan to get you to the right point. Starting with a review of your operations and a Business Valuation is a good start. Give us a call to start a confidential no pressure conversation – 207.747.9959
-Jeff ‘JT’ Tounge
