Does anybody have experience in valuing a residential solar PV installer?

March 21, 2021

by a searcher from University of California, Berkeley - Haas School of Business in Miami, FL, USA

We are looking at several solar PV residential installers, and would love to talk to someone who has experience on this. What are the EBITDA multiples for this segment? Has anyone here tried a roll up strategy? Thanks.

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Reply by a searcher
from Westminster College of Salt Lake City in Salt Lake City, UT, USA

Great point Michael! I agree. I did due diligence for a family office I'm close with on a solar installation company in Utah while doing my MBA back in###-###-#### It is a valuable relationship so I had to get it right. When I have to know, when there can be no margin for error, analysis at 30,000 ft. doesn't suffice. The best DD is done when rolling up your shirtsleeves and getting your hands dirty. So, I went down into the trenches and worked alongside the installer for a few months, focused on selling and found that in Utah, the market was hyper-saturated. The byproduct, paper-thin margins, corners being cut and ultimately a slow, painful death to those competing against players like Vivint that have $Bs to burn through. Without Vivint volumes the cost of the materials was also a barrier. Customers paying cash would realize an economic gain but if they had to finance it, the cost of capital ate up those gains and the NPV was ultimately negative. Back then, the panels just weren't efficient enough, even when amortized for the entire useful life of the product. I'm not sure nowadays and have no idea about the CA market but in my opinion, the market is about as efficient as the panels so the product will always be a commodity, leaving the install but how do you differentiate? Plus, those panels last a long time, so every install you do means the market is effectively diminishing. There's lots of angles I never saw, new product I'm not aware of but from what I gathered, it is a tough line of business.

Reply by a searcher
in Seattle, WA, USA

Be sure to check out what they're actually installing. If they're making the numbers better by cutting corners with cheap brands there may be a warranty tsunami waiting down the road. (True of any industry, really, but seems to be common in PV lately.)

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