HVAC business - multiple

March 13, 2025

by a searcher from Rice University - Jesse H. Jones Graduate School of Business in Katy, TX, USA

Looking at a HVAC business. Last 3 yrs, SDE ~185K, $1.03M, ($140k). The seller is located in a town with established contracts (60% - commercial). Asking for $1.6MM (w/o Real Estate). How does one even start on establishing a multiple without talking to Seller (dealing w/broker)

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Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA

That is awfully lumpy SDE. Dig into that first. Are these numbers reported on Completed Contract basis? Cash basis? One giant project in 2023? Assuming completed contract or cash, an accrual would be more normalized. Still, over three years, you are looking at a ~$350k SDE company. Likely in the 3x-3.25x multiple range, even for HVAC. The HVAC multiple fever doesn't kick in until higher SDE/EBITDA, especially for a non-strategic buyer (a strategic might be able to go higher if they are eliminating most of the SG&A, getting some coverage density, or breaking into a market they want to get into).

Reply by an investor
from University of Utah in Austin, TX, USA

Such a low SDE, I would say the business is worth 2-3x SDE. And then I would make sure the SDE is bullet-proof. Also look at licensing (who holds). Commercial is one and done, so the multiple should be reflective of that. The variation shows how hit and miss commercial is. Make sure you have contacts in this space and have great working cap, DM if you need more things to think about.

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