HVAC Business Valuation

The HVAC industry (Heating Ventilation And Air Conditioning) is both a service industry to the construction sector as well as dealing with both businesses and consumers directly.  It has been driven by the growth in non-residential construction activity and high rise apartment growth, although the industry contracted in the current year with the reduction in construction activity.

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The industry is very competitive, has low-medium barriers to entry (industry licensing and training requirements) and technology is constantly influencing market trends.  The equipment manufacturing and installation side of the industry has observed significant growth whilst growth in servicing has been much less.

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HVAC business valuation is influenced by the level of ongoing client agreements, degree of workforce training and experience, market differentiation and arrangements with HVAC equipment suppliers.  The key to profitability is a productive workforce and effective customer relationship management.

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Future changes in energy policy, energy efficiency and green building compliance requirements, impacts of climate change and improvements in automation technology will have an impact on industry revenue and EBITDA results.

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This includes an estimated 3.9% drop in the current year, due to a large fall in multi-unit and townhouse construction, and low growth from non-residential building construction. In contrast, industry revenue surged in 2014-15, due to high demand growth from commercial building construction and supermarkets. A spike in multi-unit apartment demand drove very high industry revenue growth in 2016-17

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Most HVAC business valuations will attract reasonable EBITDA multiples where customer agreements are in place over periods longer than 12 months and have arrangements with multiple equipment suppliers.

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