Two HVAC companies recently sold. Both generated roughly $15 million of EBITDA. One traded at 16x. The other traded at 12x. The valuation gap: about $60 million.
The only meaningful difference between them was construction exposure.
How buyers value construction work.
Institutional buyers heavily discount the value of HVAC, plumbing, and electrical companies with construction exposure. The math they apply is roughly:
- Service / replacement / maintenance EBITDA: 10x–12x at sub-scale, 14x+ at platform scale
- Construction EBITDA: 2x–4x, regardless of scale
That gap is structural. Construction earnings are project-based, lumpy, working-capital-intensive, and concentrated in a few large contracts at any given time. Service revenue is recurring, diversified across thousands of customers, and predictable. Buyers pay for recurring revenue. They don't pay much for project-based earnings.
The 15% mix difference.
The two transactions: one company was nearly pure service with under 5% construction exposure. The other carried about 20% construction. That 15-percentage-point difference in revenue mix produced the entire 4-turn multiple gap — and a $60 million difference in enterprise value on otherwise comparable businesses.
How competitive the clean assets are right now.
To illustrate how aggressively buyers are pursuing pure-play residential HVAC assets right now: one PE-backed platform recently bid 9.5x for a ~$2M EBITDA HVAC business in the Mid-Atlantic — and lost. Another PE group paid 11x.
For a $4M+ EBITDA residential HVAC platform with no construction exposure, expect PE bids in the 10x–12x range, with real competition pushing those numbers higher. Construction is not bad work — it's just valued differently. If you're carrying material construction exposure inside a residential service business and a sale is on the horizon, the cleanest move is usually to separate the two.
Thinking about selling in the next 12–24 months?
The most important transaction of your life shouldn't be the first time you've thought about it. We work with owners across HVAC, plumbing, electrical, and adjacent service categories well before they ever sign an engagement letter.
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