HVAC business - multiple

by a searcher from Rice University - Jesse H. Jones Graduate School of Business

2 days ago

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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intermediary from Wake Forest University - Schools of Business

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).

19 hours ago | like reply | 1 like

searcher

The value of a contracting company with an SDE of $185k is about $0 since you will have to pay an operator about that amount to run the place. It's a job, not a business. Don't buy unless you are an HVAC guy who wants a job.

20 hours ago | like reply | 1 like

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