PE Paying High Multiples for HVAC Businesses
Private equity is aggressively rolling up the HVAC sector, paying premium multiples of 15-20x EBITDA. High-profile deals for firms like Champions Group (~18.5x) and Redwood (~17x) show how PE firms are consolidating fragmented home services industries, betting on operational improvements and scale to justify the high entry prices.
The aggressive roll-up of the HVAC sector is fueled by its extreme fragmentation; the industry has over 50,000 firms, with the vast majority employing fewer than 25 people. This creates a massive runway for consolidation, with private equity seeing a clear path to value creation by combining these small, local businesses into regional or national platforms. Private equity's share of HVAC acquisitions surged from just 8% in 2023 to 23% in 2024, demonstrating intense new interest. In the first half of 2025 alone, PE firms and their portfolio companies were responsible for 39 of the 77 recorded M&A deals in the sector. This heightened competition has driven valuations up 20% compared to pre-pandemic levels. The core of the PE playbook involves targeting HVAC companies with a high percentage of their revenue from recurring service and maintenance agreements. These contracts provide predictable, high-margin cash flow, which is less risky than revenue from new installations that are dependent on construction cycles. Firms with strong maintenance portfolios often command higher valuation multiples. Key PE-backed platforms leading this consolidation include Wrench Group, Apex Service Partners, and Service Champions. Wrench Group, backed by Leonard Green & Partners, has acquired at least 16 companies, expanding its national footprint. Similarly, Alpine Investors' Apex platform has rolled up over 200 companies across 43 states. Post-acquisition, the strategy shifts to operational improvements. PE firms professionalize the acquired "mom-and-pop shops" by investing in technology for scheduling and inventory management, centralizing marketing efforts, and expanding service offerings to include plumbing and electrical work. This focus on efficiency aims to boost EBITDA margins, which for premium operators can exceed 15%. This wave of acquisitions is creating a new class of millionaires from the owners of these skilled-trade businesses. For technicians, the impact can be mixed; some PE-backed companies report average pay increases of 20% in the first year due to higher wages and bonuses, while others note increased pressure to upsell customers on new systems.
