Key Points From the Interview
egular listeners of Acquiring Minds will know that home services has been a very popular category over the last few years, for self-funded searchers and private equity alike.
And that within that enormous category, the most coveted type of business is HVAC.
Separately, regular listeners also know that bigger is widely considered better when buying a business as a searcher, and for self-funded searchers if you can find a business with $750k of SDE or above, that's ideal.
$1m in SDE... well that's the bullseye.
Today's guest Pete Ciaverilla sits in the happy overlap of that Venn diagram: he bought an HVAC business, and it had over $1m in SDE.
And he found it with proprietary search, a tactic that most of my guests report not being a good use of time. Pete and I get into that; he's a big proponent.
We also discuss another search tactic: using a buy-side advisor to search on your behalf. Pete used one, and while he found his acquisition on his own, listen for his views on the value of outsourcing your search.
And then we spend time on owning and operating a sizable HVAC business, his revenue mix between residential and commercial, and how he's invested in improving that mix.
Less than 3 years after buying the business, Pete has grown EBITDA from just over a million to over $1.6m, and crucially, he's improved the quality of those earnings. Based on his company's revenue mix today versus when he bought it, the value of each dollar of earnings it generates is higher.
When you take all that together — growing EBITDA from $1m to $1.6m; improving the quality of those earnings; and being in an industry where demand from private equity has surged — Pete would enjoy dramatic multiple expansion over the 4x he paid if he were to sell today.
For what it's worth, I saw a post on social recently saying that a residential HVAC business doing $1.5m of EBITDA can easily get $12m these days. Pete bought his business for around $4.3m and owns 91% of it (9% went to his investors).
Oh and by the way, to buy the business Pete put in, give or take, only about $50k of his own money.
That's an eye-popping amount of value creation in a short 3 years.
But this is all hypothetical; Pete isn't necessarily eager to sell today, even if he's fielding calls from PE on a regular basis. Listen for how he's thinking about that.
OK, lots to learn from this story of a searcher who bought a nice-sized business in a now-white hot category. Here is Pete Ciaverilla, owner of Sharon's Heating & Air Conditioning.
