Exit strategies for HVAC

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by a searcher from University of Colorado at Boulder - Leeds School of Business
in Boulder, CO, USA

2yrs ago

Exit strategies for HVAC

Hi All,

We are considering writing an LOI on an HVAC company and trying to understand the exit opportunities. The business is currently 100% project revenues. Our hypothesis for an exit is, "if we can scale the business to greater than $2M EBITDA with 50% of that revenue in project and 50% in services revenues then we will be able to exit this investment." Does anyone with HVAC experience have any insight to the truth of that hypothesis? Thanks in advance for any insights!

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reply by a searcher 2yrs ago
from Williams College in Cambridge, MA, USA

For what it is worth - potential buyers will be most interested in the service component or service contracts and will value this at the highest multiple. In terms of project work, new construction is viewed as more risky and more sensitive to economic cycles than repair or replacement. Geography will also affect the number of interested parties. Finally, $2M is really at the bottom of the range for attracting a lot of strategic interest. I think that minimum is really $3-$5M at this point.

reply by a searcher 2yrs ago
from University of Phoenix in Huntersville, NC 28078, USA

Duncan, sorry for the late reply. Depending on whether this is commercial or residential HVAC may make a difference. One of the biggest drivers may be the manufacturer if they sell products directly. Most manufacturers (particularly commercial) have assigned territories for product representation. If another services company is looking to "corner the market" and expand their exclusivity, a buyer is looking more at footprint and customer longevity. If a services company buys through distribution, this is less of an issue.