There is an increasing number of business owners in the environmental and facilities services industry who are preparing to retire. As a result, investors are examining an industry segment that is full of acquisition opportunities. There are also other factors driving the consolidation of sub-sectors in business services. Let’s look at the details of HVAC.
HVAC Services
Experts believe that the Sacramento region is definitely “a seller’s market.” Business advisors, such as Andrew Rogerson, will tell you that there are numerous buyers and that more sellers are needed.
Ultimately, they note that multiples have remained constant but are creeping up. Those experts say that they prefer to quote 3-6x EBITDA for their clients, admittedly a relatively wide range. However, they explain that each valuation is dependent upon revenue streams and many additional factors—in some instances, contractors are looking to sell when they aren’t making a profit, breaking even, or operating at a loss. The 3-6x zero still equals zero.
One of the reasons for the increased activity in the sales of HVAC services companies is that the industry has low barriers to entry. Any individual who has attended trade school and is familiar with mechanics can be brought up to speed on HVAC systems fairly quickly.
From Big to Small
First of all, it’s not that uncommon for a handyman to begin working on a neighbor’s house. Afterward, they learn how to become a plumber, obtain a license, and run a small plumbing repair business out of their truck. Relying solely on word of mouth, a skilled plumber with this setup can earn $100,000 a year. With this relatively straightforward path to a new career, the market in Northern California is currently divided among many of these one- and two-person outfits, as well as a group of slightly larger companies. Those that have a $2-10m EBITDA and employ half a dozen or 10 employees. Lastly, there are top-tier companies that dominate the market. It’s these top-tier companies that are service experts and are increasingly seeking to acquire smaller shops, as well as a growing number of private equity (PE) firms.
Experts say that PE is more numbers-oriented, as you would imagine. The goals of these players vary by firm. Some are more founder-oriented and want to do everything they can to run and grow the business, while others run the business from a spreadsheet.
Recent Acquisition
For example, Source Refrigeration recently announced the acquisition of RSI, a provider of commercial refrigeration installation and maintenance services. They cater to supermarkets, distribution centers, and cold storage facilities in Northern California. They’re headquarters are in Sacramento.
Source’s operations in Northern California will be merged with RSI, and the combined operations will be headed by RSI’s founder, Sam Wilson. They will operate under the Refrigeration Solutions brand name.
Business is Andrew’s Business.
He’s been serving the State of California and the Sacramento area, including Sacramento County, Solano County, Yolo County, Sutter County, Placer County, El Dorado County, Amador County, San Joaquin County, Contra Costa County, the California Central Valley, and the entire San Francisco Bay Area.
Andrew can help you organize your HVAC financial and operating information to promote your business to prospective buyers most effectively. Take the time to speak with Andrew about selling your HVAC system or to other companies, or visit our website for our services. Contact Andrew via email or call him at (916) 570-2674.
This is part of the tips to sell a construction company in California series ->