HVAC Add-On Deals Surged 88% in a Single Year. Here's Why PE Firms Can't Stop Buying.

Through the first half of 2025, private equity firms completed 32 add-on acquisitions in HVAC — up 88% from just 17 in the same period the prior year.

That's not a rounding error. That's a structural shift, confirmed by S&P Global Market Intelligence's analysis of HVAC M&A activity.

And it's not slowing down. Capstone Partners tracked 149 total HVAC transactions in full-year 2025 — a 12.9% increase over the prior year. More than 50% of the 77 HVAC deals tracked through June 2025 were PE-backed.

Private equity has decisively taken over your industry. Here's why — and what it means for you.

The 88% Stat: What It Actually Reveals

When people see a number like 88%, they assume it's an outlier — a spike that corrects itself. This one won't.

The 88% surge in PE add-on activity isn't the result of a single mega-deal or a momentary trend. It reflects a systematic execution of the buy-and-build playbook across dozens of platforms simultaneously. Platform firms that raised capital in 2021–2023 have hit their deployment windows. They need to buy. They have the money. And your market has the targets.

S&P Global's reporting made this explicit: megadeals get the headlines, but add-on deals are what actually power middle-market PE returns. And right now, add-ons in HVAC are the engine running hardest.

There are roughly 114,000 HVAC businesses operating in the United States, the vast majority family-owned and generating under $10 million in annual revenue. That's an enormous pool of acquisition targets. PE has barely scratched the surface.

The Math Behind the Buying Spree: Multiple Arbitrage

To understand why PE can't stop buying HVAC add-ons, you need to understand the math behind what they're doing. It's called multiple arbitrage, and it's the cleanest wealth-creation mechanism in private equity.

Here's how it works in practice.

A PE firm buys a strong regional operator — the platform — at 6x to 7x EBITDA, per The Alignment Firm's breakdown of PE trades consolidation. Then they begin acquiring smaller local operators — the add-ons — at just 3x to 4x EBITDA. Once the combined platform hits sufficient scale (typically $100M+ in revenue), they sell the entire entity to a larger fund at 12x to 15x EBITDA.

The arbitrage is in the gap. A $1 million EBITDA add-on bought at 3.5x costs $3.5 million. When the platform exits at 13x, that same $1 million of EBITDA is worth $13 million. That's $9.5 million of value created — not from operational improvements, but purely from the multiple expansion that comes with scale.

This is why PE firms love the trades. As Alberto Sinesi, a director at PKF Investment Banking, told S&P Global: "Private equity firms love situations where they can buy a cornerstone company, a platform, and then build around that platform."

The add-on isn't just an acquisition. It's a math problem with a known answer.

What PE Firms Actually Look For in an Add-On Target

Not every HVAC or trades business gets a call from a PE-backed platform. There's a specific profile they're hunting for, and it's worth knowing exactly what it is — whether you want to sell or simply want to understand what you're up against.

The baseline criteria, according to Exit Lab HVAC's analysis:

• Revenue: At least $2M–$5M in annual revenue, though many platforms target higher
• EBITDA margins: 15% or better
• Recurring revenue: 30–40% from service contracts and maintenance agreements
• Customer concentration: No single customer exceeding 30% of revenue
• Owner independence: Business can operate without the owner for 30 days
• Financial cleanliness: Reviewed or audited financials, accurate EBITDA, detailed customer data

Beyond the numbers, platforms are also looking for geographic density — they want add-ons within 50 miles of existing operations to slash truck time and drive logistical efficiency. They want businesses with scalable operations, documented processes, and a management layer that doesn't revolve around the founder.

Eliot Kerlin Jr., managing partner at Broadwing Capital Management, summarized the origin story of most targets well: "A lot of these companies started as family-owned or founder-owned businesses with a truck or a couple of trucks and grew from there." That's your business. That's this industry. And that's exactly what PE is hunting.

The Three Biggest Platforms Buying Right Now

This isn't abstract. There are specific PE-backed platforms actively acquiring in the HVAC and trades space right now — and they're moving fast.

Orion Group (backed by Alpine Investors) has completed over 35 acquisitions since November 2020. They're one of the most aggressive buyers in the residential trades space.

Sila Heating & Air Conditioning (backed by Morgan Stanley Capital Partners) has done 28 acquisitions since May 2021. They have significant capital and a clear geographic expansion strategy.

FirstCall Mechanical (backed by SkyKnight Capital) has completed 15 acquisitions since January 2022. Smaller but still a meaningful player in targeted markets.

These aren't hypothetical buyers. They have mandates from their limited partners to deploy capital. They have deal teams whose entire job is to find and close on businesses like yours. If your market has any of these platforms nearby, they are either already talking to your competitors or will be soon.

Why Tariffs and Economic Uncertainty Haven't Slowed Anything Down

Every time there's economic turbulence, some owners assume M&A activity will cool. In the trades, that assumption is wrong.

S&P Global's reporting addressed tariff concerns directly. Alberto Sinesi at PKF Investment Banking was clear: "Tariffs have not really prevented private equity firms from making acquisitions."

Your labor is domestic. Your service calls are domestic. Your customer base isn't going anywhere. The demand drivers — aging housing stock, non-discretionary repair needs, climate volatility — don't respond to trade policy.

Pete Witte, global private equity lead analyst at EY, put it bluntly: "Anything to do with the trades — where you've got stable customer bases, long-term visibility into the outlook for the business, strong recurring revenues. It just lends itself to that kind of activity."

The global HVAC market was worth $310.6 billion in 2024, with the U.S. accounting for $88.9 billion of that total. That market does not contract because of tariffs. It grows.

Where Independent HVAC Owners Fit in This Picture

If you're an independent operator, this wave presents a genuine fork in the road. And most owners I talk to haven't yet processed which path they're actually on.

Path 1: You become an acquisition target. You optimize your business — recurring revenue, clean books, owner-independent operations — and you let a PE-backed platform pay you a premium multiple for what you've built. You either cash out or roll equity and ride the exit. This is a real, achievable outcome for owners who move with urgency.

Path 2: You become a platform or roll-up partner. You're not selling — you're buying. You partner with growth capital to execute your own acquisition strategy in your market. You're the one making the calls, not receiving them. This is for owners who want to scale and have the operational foundation to support it.

Path 3: You get squeezed. PE-backed competitors move into your market. They outspend you on marketing, undercut you on price (because their cost of capital is cheaper), and poach your technicians with better benefits. Your revenue holds for a year or two, then starts to erode. This is what happens to operators who don't adapt.

The good news: most owners have more runway than they think. But the window to choose your path deliberately — rather than having circumstances choose for you — is finite.

How to Position Your Business Now

The difference between a 4x exit and a 10x exit often comes down to preparation that started 12–24 months before any deal. CFOx Advisory's 2026 M&A Outlook is direct: quality assets see multiple expansion while lower-quality assets get discounted. The K-shaped valuation split is real.

The businesses that attract premium offers — or that successfully raise growth capital — share a common profile:

Recurring revenue is king. Memberships and service contracts aren't just good business — they're the single biggest driver of valuation. Top-quartile firms have membership-driven revenue accounting for nearly 28% of total revenue. Below 15% recurring revenue is considered high-volatility by PE buyers.

Your tech stack matters more than you think. The primary differentiator between a 7x and a 12x business, per CFOx Advisory, is operational and technological sophistication. A modern CRM, dispatch software, and financial reporting infrastructure signal a scalable business.

Owner dependency kills deals. If you are the business — if deals close because of your relationships, or if the shop struggles when you're not there — you're carrying a 20–30% discount into any buyer conversation. Build the management layer before you need it.

Get your financials clean now. Reviewed or audited financials, accurate EBITDA, and clean customer data are table stakes. PE buyers have seen too many owner-reported numbers that don't survive diligence.

If you're not sure where your business stands on any of these dimensions, that's the first problem to solve. Our Scale Roadmap at NCKTR gives you a framework for building toward institutional-grade positioning — and how we work with trades owners is detailed on our how-it-works page.

What This Means for Your Business

The 88% surge in PE add-on deals isn't a market anomaly. It's the middle of a consolidation wave that will reshape your industry over the next 36 months. The operators who come out ahead are the ones who treat this moment as a strategic inflection point — not just a news story.

What does "add-on acquisition" mean in private equity?

An add-on acquisition is when a PE-backed platform company buys a smaller business and integrates it into the existing portfolio. The platform already has infrastructure, management systems, and capital. The add-on brings revenue, customers, and technicians. PE firms use this strategy to grow quickly while benefiting from the multiple arbitrage between what they pay for the add-on (3–4x EBITDA) and what the combined entity eventually sells for (12–15x EBITDA).

Why did HVAC add-on deals increase 88% in one year?

The surge reflects PE platforms hitting their capital deployment windows after raising funds in 2021–2023. They have mandates to buy, and HVAC offers the ideal combination of fragmentation (114,000 mostly independent businesses), recurring revenue, recession resistance, and strong cash flow margins. The math of multiple arbitrage in a fragmented, essential-service industry is simply too compelling to ignore.

How do I know if my HVAC business is an acquisition target?

PE buyers typically look for businesses with $2M–$5M+ in annual revenue, EBITDA margins of 15% or better, 30–40% recurring revenue from service contracts, and owner-independent operations. Clean financials and geographic density within growing markets are also critical. If you check most of those boxes, there is likely a PE-backed platform that would have a conversation with you today.

Can I compete against PE-backed HVAC companies without selling?

Yes — but it requires intentional positioning. PE-backed competitors have advantages in marketing spend, labor retention, and technology. Independent operators who compete successfully tend to win on local relationships, response times, and specialized expertise. The key is building recurring revenue through service contracts, modernizing your tech stack, and establishing a brand that doesn't depend entirely on the owner's reputation.

Should I reach out to PE-backed platforms directly or wait to be approached?

Neither approach is optimal without preparation. If you reach out unprepared, you'll get a lower offer and weaker terms. If you wait to be approached, you lose negotiating leverage. The best position is to spend 12–24 months building the operational profile that commands a premium — clean books, recurring revenue, documented processes — and then engage multiple buyers simultaneously to create competitive tension. That's how owners maximize their outcome.