The HVAC industry remains strong in 2022 for prospective HVAC company sellers and buyers due to reaping the benefits of remaining an essential industry throughout the two years of the pandemic. Despite some challenges, the industry is growing, as homeowners and property managers still need HVAC maintenance and new unit installs. Whether you are buying or selling an HVAC business, there is potential benefit in the current market.
The most common occurrence in the market is larger companies acquiring smaller companies, as these larger companies are looking to grow off the robust client base small companies have managed to obtain over the last two-three years. Larger companies are also looking to avoid labor shortages by purchasing small HVAC companies with reliable staff. This is a boon for smaller HVAC owners looking to cash out on a solid two-three years of growth. Larger companies are willing to pay a premium for a company with a loyal customer base and staff.
The demand for HVAC work is also not reducing anytime soon, as temperatures get hotter and developers build more housing in need of newly installed HVAC units.
However, there are still many industry challenges — though they are improving, they exist and will be a consideration. Labor shortages persist as a yearlong problem, meaning that company owners dealing with these staff shortages are less appealing to prospective buyers. Buyers will be reluctant to buy an HVAC company if they are unable to obtain the staff needed to manage the increased client demand.
HVAC companies continue to deal with inflation. Inflation dropped to 8.5% in July from a 40-year high of 9.1%, according to the Bureau of Labor Statistics. However, small declines are not going to bring much relief to already sky-high material prices in the HVAC industry. The increased cost of goods will deter some prospective buyers, though many more will willingly absorb the higher costs to grow. The increased cost of materials also comes with an increased backlog of jobs, meaning you may have to structure a backlog/WIP formula with potential buyers to manage that backlog before the sale.
Lastly, while the market remains strong, it is not as strong as in 2021 and early 2022 when interest rates were still low. An increase in interest rates will leave some buyers unable to get financing and give you a smaller pool of prospects. That also means the remaining prospects in the pool are more experienced and usually have more capital. It is important for buyers and sellers in the HVAC industry to monitor interest rates which are likely to rise as long as inflation remains an issue.
Tips Ensure Your Business Maintains Value
HVAC company owners looking to sell can benefit from the current market; however, selling your business at top value requires work on the seller's end.
Selling can often be a months to years-long process, so you must maintain the quality of your HVAC company during that time. Continue to grow your company and keep your current customer base happy. Continue to get positive online reviews to show any prospective buyers your company is still worth purchasing.
Make sure your equipment is working and your company is fully staffed with happy employees. Often times when an owner knows he or she is not going to be around long term, they will stop managing the business. When that happens revenues drop, employees become unhappy, and buyer’s retreat.
Maintain your HVAC company to ensure the best value for your business.
The HVAC industry remains a growing industry with many opportunities for prospective buyers and sellers. However, labor shortages, supply chain disruptions, cost of goods, and rising interest rates remain challenges to overcome. HVAC company owners with good staff and a well-run business should find a lot of potential in the current market.
