What Private Equity Looks for in Home Services Companies

If you own an HVAC, plumbing, electrical, or other home services company, you've probably noticed more interest from buyers lately. That's not your imagination — private equity has discovered the trades.

Here's why PE firms are so interested, and what makes a home services business attractive to institutional buyers.

Why PE Loves Home Services

Recession resistance. When the AC breaks in August, people pay to fix it. Home services demand is relatively stable regardless of economic conditions.

Fragmentation. The industry is incredibly fragmented — thousands of small operators, very few large players. That means opportunity for consolidation.

Recurring revenue potential. Maintenance agreements and service contracts create predictable cash flow. PE firms love businesses they can convert to recurring revenue models.

Skilled labor moat. It's hard to find good technicians. Companies that have figured out recruiting and retention have a real competitive advantage.

Aging owners. Many home services companies were started by baby boomers who are now looking to exit. That creates deal flow.

What They're Looking For

Not every home services company attracts PE interest. Here's what separates the targets from the rest:

Scale matters. Most PE firms want platforms with $1-2M+ EBITDA. Below that, you're likely selling to an individual buyer or a smaller aggregator. Nothing wrong with that — but the multiples are different.

Recurring revenue. Service agreements are gold. A company doing 40% of revenue from maintenance contracts is worth more than one doing 100% break-fix work.

Management depth. If you're the owner and the lead technician and the sales manager, that's a problem. PE buyers want businesses that can run without the owner in the truck.

Clean financials. This means more than just having a CPA. It means your books clearly show revenue by service type, technician productivity, customer acquisition costs, and other metrics sophisticated buyers care about.

Growth trajectory. PE firms are buying growth. A company growing 15% annually is more attractive than one that's been flat for five years, even at the same revenue level.

Geographic density. Route density matters in home services. A company with tight geographic coverage can service more calls per day with less windshield time.

What They'll Pay

Multiples vary widely based on size and quality:

• $500K - $1M EBITDA: 3x - 4.5x
• $1M - $3M EBITDA: 4x - 6x
• $3M+ EBITDA: 5x - 7x+

Add-on acquisitions (companies bought to bolt onto an existing platform) typically trade at the lower end of these ranges. Platform deals (the first company a PE firm buys in a new market) trade higher.

Companies with strong recurring revenue, proven management teams, and clear growth paths can exceed these ranges.

How Deals Typically Work

PE acquisitions usually aren't simple "write a check, hand over the keys" transactions. Common structures include:

Earnouts. Part of the purchase price is tied to future performance. If the company hits certain revenue or EBITDA targets, you get additional payments.

Rollover equity. PE buyers often want owners to keep 10-30% equity in the new company. This aligns incentives and gives you upside if the platform grows and sells later.

Employment agreements. Most buyers want the owner to stay for a transition period — anywhere from 6 months to 3 years depending on the situation.

Working capital adjustments. The final price usually adjusts based on working capital (inventory, receivables, payables) at close.

What To Do If You're Interested

If you think your company might be a PE target, or you want to become one:

Build your service agreement base. Even converting 20% of your customers to maintenance contracts makes a meaningful difference.

Develop your team. Promote or hire a GM. Cross-train technicians. Build bench strength.

Clean up your books. Implement job costing. Track revenue by service type. Know your customer acquisition cost.

Document everything. SOPs, training materials, pricing guides. Anything that shows the business can operate systematically.

Grow deliberately. Expansion into adjacent services (HVAC company adding plumbing) or new territories shows scalability.

Even if you never sell to PE, these same improvements make your business more profitable and easier to run.

The Timeline

Most PE firms aren't looking for businesses that need to be sold tomorrow. They want owners who are planning 1-3 years out, willing to stay through a transition, and interested in potentially rolling equity.

If you're thinking about exit options, start the conversation early. The best outcomes come from preparation, not desperation.

Want to see what home services companies typically sell for? Check the valuation guide or schedule a conversation to talk about your specific situation.