HVAC Valuation Guide
Private Equity Is Reshaping HVAC Valuations
Five years ago, a profitable HVAC business sold for 3x SDE and you felt good about it. Today, PE-backed buyers are paying 5x, 6x, even higher for the right company. Understanding this wave, and where your business fits within it, could mean hundreds of thousands of dollars in difference.
$12.3B
PE-backed HVAC deal volume
in the last 24 months
Why PE Firms Want Your HVAC Business
Private equity doesn't pour billions into industries on a whim. And HVAC checks every box on their acquisition checklist.
Recession-Resistant Demand
When a furnace dies in January, nobody waits for the economy to improve. HVAC is an essential service with inelastic demand. PE firms prize businesses that generate cash flow regardless of macroeconomic conditions. During the 2020 slowdown, HVAC companies actually saw revenue increases as homebound consumers invested in comfort.
Recurring Revenue Potential
Maintenance contracts create predictable monthly revenue that PE firms can model, finance against, and scale. An HVAC company with 1,500 maintenance contracts at $15/month generates $270K in annual recurring revenue, money that arrives whether the phone rings or not. PE investors see each contract as an annuity they can compound across multiple acquisitions.
Fragmented Market, Easy Roll-Up
The HVAC industry has over 120,000 businesses in the US, most doing under $5M in revenue. No single company owns more than 2% of the market. This fragmentation is catnip for PE roll-up strategies: buy a platform, tuck in smaller competitors, centralize operations, and create a regional powerhouse worth far more than the sum of its parts.
Strategic vs. Financial Buyers
The type of buyer who acquires your business will materially affect your payout, your timeline, and your employees' futures. Here's how the two main categories compare.
Strategic Buyer
Larger HVAC companies, regional competitors, multi-trade home service firms
Typical Multiple
3.0x - 4.5x SDE
Deal Timeline
4 - 8 months
Culture Fit
High. They understand the trade, know your market, and often retain existing branding.
Post-Sale Involvement
Usually 6-12 months transition period. Clean exit is more common.
Growth Plans
Integrate into existing operations. Your brand may eventually merge into theirs.
PE / Financial Buyer
Private equity firms, family offices, PE-backed platform companies
Typical Multiple
4.0x - 6.0x+ SDE
Deal Timeline
3 - 5 months
Culture Fit
Variable. Best PE firms invest in culture; others prioritize margins. Do your diligence on the buyer.
Post-Sale Involvement
Often 2-3 years. May require 10-30% equity rollover with a second bite at exit.
Growth Plans
Aggressive. Expect territory expansion, tuck-in acquisitions, and professionalized operations.
The Recurring Revenue Premium
Nothing moves the needle on HVAC valuations like recurring maintenance contracts. Here's why they matter so much and what they're worth in dollar terms.
+1x to 2x
Additional SDE multiple for businesses with 30%+ recurring revenue vs. project-only companies
85%+
Contract renewal rate that signals "sticky" revenue. Below 70% and buyers question the value of the contract base.
$180 - $300
Annual value per residential maintenance contract. Commercial contracts run $500 - $2,000+ depending on scope.
Consider two HVAC businesses, each generating $400K in SDE. Company A runs 100% on project work: new installations, emergency repairs, word-of-mouth referrals. Company B generates 35% of revenue ($525K annually) from 2,100 active maintenance agreements. Company A might sell for 3.5x ($1.4M). Company B, with identical profitability, might command 5.0x ($2.0M) or more. That $600,000 difference is the recurring revenue premium.
The math is pretty straightforward: recurring revenue reduces buyer risk, improves bank financing terms, and provides a built-in customer base for upselling replacement units. If you're planning to sell in the next 1-3 years, investing in building your maintenance contract base is one of the highest-ROI activities you can pursue.
Valuation Range by Business Profile
Where does your HVAC company fall? These profiles are based on patterns across hundreds of HVAC transactions.
Below Average
3.0x - 3.5x SDE
- •Under $300K in SDE
- •Minimal recurring revenue (under 10%)
- •Owner-dependent operations
- •Limited documentation or informal bookkeeping
- •Residential-only, single-trade focus
Market Average
3.5x - 4.5x SDE
- •$300K - $600K in SDE
- •15-30% recurring revenue
- •Some management layer beyond the owner
- •Clean financials with 2-3 years of records
- •Mixed residential and light commercial
Premium
4.5x - 6.0x+ SDE
- •$600K+ in SDE
- •30%+ recurring revenue with high retention
- •Full management team, minimal owner involvement
- •Audited or CPA-reviewed financials
- •Multi-trade (HVAC + plumbing, electrical) or strong commercial base
Multiples based on market data from HVAC transactions 2022-2025. Actual valuation depends on local market, buyer pool, and deal structure.
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