This report covers EBITDA and SDE (Seller’s Discretionary Earnings) multiples for private HVAC company sales from Q3 2022 to Q1 2024. Our research team compiled data for this report from private equity networks, expert interviews, and proprietary databases. (Sources)
The tables below display average EBITDA and SDE multiples for HVAC companies, categorized by company type, specialization, as well as EBITDA and SDE range.
EBITDA Multiples for Private HVAC Companies, Q1 2024
| Company Type | Specialization | EBITDA Range | ||
| $500K-1M | $1-5M | $5-10M | ||
| Commercial | Heating | 5.6x | 7.5x | 8.5x |
| Cooling | 5.9x | 7.8x | 8.7x | |
| All-Purpose | 5.1x | 7.3x | 9.1x | |
| Residential | Heating | 6.2x | 8x | 9.7x |
| Cooling | 6x | 8.1x | 9.4x | |
| All-Purpose | 5.8x | 9.7x | 11x | |
| Industrial | Heating | 6x | 7.7x | 8.9x |
| Cooling | 5.3x | 8.1x | 9.1 | |
| All-Purpose | 5.5x | 7.9x | 9.3x | |
SDE Multiples for Private HVAC Companies, Q1 2024
| Company Type | Specialization | SDE Range | ||
| $500K-1M | $1-5M | $5-10M | ||
| Commercial | Heating | 4.9x | 5.4x | 6.4x |
| Cooling | 5.2x | 5.7x | 6.5x | |
| All-Purpose | 5.1x | 5.8x | 6.7x | |
| Residential | Heating | 5x | 6.1x | 7.4x |
| Cooling | 5.5x | 6.2x | 7.7x | |
| All-Purpose | 5.6x | 6.5x | 7.9x | |
| Industrial | Heating | 5.3x | 5.7x | 7x |
| Cooling | 5.4x | 5.9x | 7.7x | |
| All-Purpose | 5.4x | 6x | 7.1x | |
The following sections include an overview of HVAC M&A in Q1 2024.
The State of HVAC M&A
As of Q1 2024, HVAC companies are in a stable position, continuing the steady increase in valuations that has occurred over the last decade. Current averages hover around 8x EBITDA/ 5.1x SDE, which marks a 20% increase from pre-pandemic numbers.
HVAC is fairly resistant to macroeconomic fluctuations due to its necessity as a service. The only exception to HVAC’s stability is within the commercial sector. Commercial HVAC sees most of its revenue from new construction installation, creating a dependence on new projects—which are often subject to macroeconomic factors.
The following chart depicts the trend of EBITDA multiples for private commercial HVAC compared to residential and industrial HVAC between Q1 2020 and Q3 2023.
HVAC EBITDA Multiples, Q1 2020 – Q1 2024
Within both residential and commercial sectors, the majority of HVAC companies utilize small operations with a limited number of skilled technicians. This business model allows them to generate profitable revenue. Our data suggests that sellers who employed a team of well-trained technicians, as opposed to a bare-bones workforce, generated better M&A results.
Our research team found that ~52% of HVAC companies that go to market do not sell. In these cases, buyer hesitation occurred for one of several reasons, typically a high level of owner dependence and customer attrition. For the companies that did sell, the presence of an M&A advisory firm was associated with higher valuations and cash payouts.
| Related: See our article on the Top M&A Advisory Firms in the US |
The Future of HVAC M&A – Our Team’s Predictions
In 2024, our research team is seeing the following trends:
- Valuation multiples hinge on good operations. By reducing owner dependency and showing a stabile revenue stream through long-term or recurring contracts, HVAC companies can present a vision of their business that appeals to almost all acquirers. This concept is especially important for HVAC companies in the commercial sector, since their installation-based business model often makes them more difficult to sell.
- Residential HVAC companies will continue to outperform the commercial sector. Due to a more consistent customer base, residential companies will continue to dominate the HVAC M&A subsector until the economy rebounds, at which time commercial HVAC companies will see an increase in multiples and overall earnouts.
- Weather changes will drive a steady long-term increase in HVAC valuations. As their services become more essential in the face of climate change, both perceived and actual, HVAC companies across all sectors will likely enjoy a reliable increase in valuations.
- The upcoming year poses challenges. With the Fed continuing to raise interest rates after a brief pause over the summer, HVAC companies will face slightly lower valuations as buyers get shorter on capital. 2024’s M&A market will likely see a greater number of smaller (sub-$100M) deals, which may be good news for lower middle-market companies.
Selling your HVAC Company
Selling an HVAC company is a stressful process for owners, who must grapple with both the logistical and the emotional process of the sale. Having sold multiple businesses to private equity and strategic buyers, I am a big fan of transparency, a value that doesn’t characterize the M&A world when it comes to valuations. I’m available for a brief conversation if you are seeking third-party advice. You can contact me through the link below or this site’s contact page.
Sources:
- How To Achieve a 5x Valuation Multiple In An HVAC Business (ACHR News)
- How to Value an HVAC Business (Beacon)
- Construction Industry Valuations and EBITDA Multiples (BMI Mergers)
- How to Value and Sell a HVAC Business (MidStreet Mergers & Acquisitions)
- The HVAC Industry is Booming (The Training Center of Air Conditioning & Heating)
- US HVAC Systems Market Size, Share, & Trends Analysis Report, 2023-2030 (Grand View Research)
- Valuation Multiples for HVAC Companies (Peak Business Valuation)
