Decision summary
- PE-backed groups mostly buy shops doing $2M to $25M. Smaller shops usually sell to a local or individual buyer.
- Not all of the price lands at closing. Expect part of it later, tied to targets you have to hit after you sign.
- Settle who controls those targets, and what your job is, before you sign anything.
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What PE-backed groups buy
Most of them want shops doing roughly $2M to $25M a year. Some go after bigger ones, past $50M, when the territory and the type of work fit what they already own.
They are buying coverage in your area. They keep your name on the truck and change the pricing, the parts, the dispatch and the process behind it. They're constantly expanding and yours is rarely the last one they buy in your area.
The floor is different at every firm. Some want seven figures of profit and a big book of maintenance agreements. Others will take a strong few-million-dollar shop to fill in next to one they already own. Do not trust last year's "we buy anything over $X" post.
A regular sale vs. a PE deal
| A regular sale | A PE deal | |
|---|---|---|
| Typical size | Median sale around $750k | $2M to $25M in revenue, bigger when the fit is right |
| What they pay | Around 2.75x earnings | More, when the books, the recurring work and the management hold up |
| What they pay for | What the business earns for a working owner | Clean earnings, recurring work, a crew that stays |
| How you get paid | Cash, maybe some paid over time | Cash, plus a piece riding on targets, plus a stay-on period after close |
| What kills it | Messy books, owner still in the truck | Fights over the targets, culture shock, techs leaving day one |
Smaller shops sell every day. They just sell more often to a local buyer, an individual, or to someone who waited and cleaned the place up first.
The other buyers
A bigger company in the trade wants your territory, your techs, your customers or your licenses. Ask what gets combined and what stays local.
A local or individual buyer wants a business he can run himself with steady cash. Ask how he will pay for it and who replaces you day to day. He may need you to carry part of the price, or stay longer.
Your own crew. One owner was lining up a PE sale when five technicians bought the shop instead. They had watched these groups lose the techs customers ask for by name. It works when the team can carry the work. Check them like any buyer: cash, financing, and who runs day one.
How a PE deal actually pays
A PE deal usually pays in pieces. Part of the price is cash at closing. Part of it only pays if the shop hits targets after you sign. Part of it depends on you staying on, often for a few years. Some deals also ask you to keep a piece of their company instead of taking cash.
Here is one example of how that can look. These are made-up numbers, not a typical deal. Say a group offers $6M for your shop:
| Price offered | $6,000,000 |
| - Held back, pays only if targets are hit | -$900,000 |
| - Kept as a piece of their company instead of cash | -$600,000 |
| - Debt paid off at close | -$350,000 |
| - Deal costs | -$360,000 |
| Cash at close, before tax | $3,790,000 |
In this example $1.5M of the price depends on what happens after you sign. Change any line and the bottom number moves. Ask any buyer to put their own version of this in writing before you compare two offers on price.
The money riding on targets is the part to fight over. It pays only if the business performs, and after close they control the staffing, the marketing, the pricing and the books. Before you sign, pin down:
- What exactly is being measured: revenue, gross profit, or profit after overhead.
- Who does the math, when you see it, and what you are allowed to check.
- How shared costs and moved customers get counted.
- Who settles a disagreement, and what happens if key people quit in month one.
Settle all of that before you celebrate the price.
What "staying on" really means
Some want you to keep running the shop. Others want a short handoff. The risk is agreeing to hit a number while someone else controls pricing, hiring and dispatch. That is how owners end up stuck running a shop they no longer own.
Ask: do I still approve estimates and hire? Who can change pay, vendors, territory, or what we charge for maintenance agreements? What if they buy the shop down the road and move dispatch to a shared team? Settle it in writing before you sign, not after close.
Your crew on day one
After a Seattle-area mom-and-pop shop sold to a PE-backed group, the crew felt it first in the process and the paperwork. Techs filled out new-hire forms for the parent company while the trucks still looked local. So even while things may seem the same from the outside, your crew will feel the effects.
Plan who tells the crew, when, and what they hear about pay, benefits, trucks, dispatch software, and licensing. Separate what is settled from what is still open. Do not promise nothing will change. If the crew hears "sold" from a customer or a group text, the buyer inherits the questions and you may inherit a price cut.
Before you sign the offer letter
Get written answers on:
- Who sets pricing after close.
- Who tells the techs, and when.
- Whether your name stays on the trucks.
- Who decides hiring, vendors, and dispatch on day one.
- Who controls the targets if they change how the shop runs.
When PE is a poor fit
- You want a local person to take it over.
- Your work is mostly new construction and they want service.
- Your earnings and add-backs cannot be backed up yet.
- You want a clean exit and they want you for five years.
- You do not want money riding on the future, or a piece of somebody else's company.
That does not make the business unsellable. It means another buyer, or more prep, fits better.
One caller or a real market
One inbound call is one company's opinion of your shop. Putting two or three buyers next to each other is how the price and the terms move. Compare using a broker against going direct, check what your HVAC business is worth, and if you are not ready, prepare your HVAC business for sale first.
If you are in the size range these firms buy, with recurring work, a crew that stays, and clean earnings, bring your numbers. We can help you figure out whether PE, a bigger company in the trade, or a direct buyer is the better fit.