Many service companies receive private equity offers. Here is what to understand before saying yes.
In this article
Why they call
Private equity firms buy HVAC, plumbing, electrical and other service companies to combine them into larger groups. Recurring revenue and maintenance plans make companies attractive.
Know your numbers
Clean financial statements and earnings are the basis of any offer.
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Valuation basics
Offers often use a multiple of adjusted earnings. Quality of earnings matters.
Deal structure
Cash at closing, equity rollover and earnouts can change the real value.
Staying on
Many deals require the owner to stay for a period.
Culture and team
Ask how employees and customers will be treated.
Advisors
A business broker, attorney and accountant protect your interests.
Alternatives
Selling to managers or family may fit your goals better.
An example
A plumbing company owner received an attractive offer with a large earnout. With advisors, he negotiated more cash at closing and clearer earnout targets.
Know your numbers
Revenue mix, recurring revenue, margins and customer concentration all affect value.
Common mistakes
Signing letters of intent without advisors, ignoring deal terms and not thinking about life after the sale.
Price every call so it pays.
We help service businesses set clear policies, book better jobs and turn more calls into profitable work.
Frequently asked questions
Why are private equity firms buying service companies?
Home and commercial services have recurring demand and fragmented markets, so private equity firms buy multiple companies to build larger platforms.