Reuters reported that American Residential Services (ARS), the PE-backed residential HVAC platform, is exploring a sale at an expected enterprise value of approximately $3.5 billion. At the reported numbers, that implies roughly 17.5x 2026E adjusted EBITDA of $200 million — or about 20x trailing 2025 EBITDA of $175 million.
The process is still early.
ARS started with fireside chats — which is the very front of a sale process, well before binding bids land and well before pro forma adjustments get tested in diligence. Numbers floated at this stage almost always reflect the seller's bull case. Final clearing prices tend to land somewhere more measured.
The 2026 EBITDA growth assumption is a heavy lift.
The math: ~$175M of 2025 adjusted EBITDA scaling to $200M in 2026E is roughly 14% year-over-year growth. That's a meaningful jump to underwrite — especially if all of it is organic.
For a platform to defend that kind of pro forma EBITDA in diligence, it typically needs a stack of bolt-on acquisitions either closed or under signed letters of intent — so the buyer can give credit to the full pro forma figure. But ARS effectively paused M&A two years ago. The bolt-on pipeline that would support a 14% growth story most likely isn't there.
Big-box exposure cuts into the multiple.
The platforms that institutional investors are anchoring residential HVAC multiples against right now: Sila (17x), Redwood (17x), and most recently Champions (18.5x). At those multiples, ARS values out at $3.4B–$3.7B+.
But ARS has meaningful "big box" channel exposure — partnerships with Home Depot and Lowe's drive a notable portion of lead flow. That's a double-edged sword: great for volume, but the work tends to be lower margin and introduces real customer concentration risk. A buyer paying 17–18x typically wants a cleaner direct-to-consumer service mix, not a platform whose growth depends on two retailers continuing to send leads. That risk profile probably shaves something off the multiple.
Top-line growth is slow.
At an estimated $1.5B of 2026 revenue, ARS is compounding top-line at roughly a 3.2% CAGR since 2022. With ~13% EBITDA margins, that's a platform growing revenue at about 3% per year. Buyers paying 17–18x multiples are paying for growth, not stability. A 3% top-line story at a 17.5x multiple is a tension the diligence process will surface.
A realistic valuation range.
Pulling the threads together:
- Bear case: $2.7B. 15.5x on $175M of 2025 adjusted EBITDA. Buyers haircut the multiple for big-box exposure and discount the 2026E forecast.
- Bull case: $3.4B. 17x on $200M of 2026E adjusted EBITDA. Buyers credit the growth case and the multiple lands in line with Sila, Redwood, and Champions.
The center of that range sits at roughly $3.0B. The reported $3.5B figure is genuinely the high end — achievable if the process is well-run, the growth materializes, and the multiple holds.
What this means for the market.
Either way, ARS in market matters. We just saw Champions clear at 18.5x. Whether ARS gets close to that — or settles at a discount — will tell us a lot about how strict, or how generous, institutional buyers want to be at the top of the residential HVAC platform M&A cycle.
Operating in a vertical where this kind of activity matters?
We work with operators across residential HVAC, plumbing, electrical, and adjacent service categories. No pitch — just an honest conversation about where you are and what the market is telling you.
Get in Touch →