PE Add-On Activity in HVAC Equipment Up 44% YOY — The Buy-and-Build Era Is Accelerating

Private equity add-on acquisitions in the HVAC equipment segment rose 44 percent year-over-year in 2025, and the pace has continued accelerating into 2026. Add-on activity — where PE-backed platform companies acquire smaller businesses to expand geographic coverage, add product capabilities, or consolidate market share — is now the dominant deal type in HVAC equipment M&A.

Understanding the buy-and-build strategy that drives this activity is important for every HVAC business owner, whether you are evaluating a sale, considering whether to grow through acquisition yourself, or simply trying to understand the competitive landscape your business is operating in.

What 44% Add-On Growth Means

Capstone Partners' HVAC M&A data distinguishes between platform investments — where a PE firm acquires a company to serve as the foundation of a larger business — and add-on acquisitions — where an existing PE-backed platform acquires smaller companies to expand. The 44 percent year-over-year growth in add-on activity reflects a market where existing HVAC platforms are in active consolidation mode.

The implications of add-on dominance are significant. Platform investments are typically larger, more competitive, and command higher valuations because they attract multiple PE bidders. Add-on acquisitions are typically smaller, involve less competitive auction processes, and are often initiated by the platform company approaching the target directly rather than running a formal sale process.

Capstone Partners data shows PE add-on acquisitions in the HVAC equipment segment rose 44% year-over-year in 2025, making add-ons the dominant deal type in HVAC equipment M&A and reflecting the accelerating build-out of PE-backed platforms that are actively expanding geographic coverage and capability through acquisition.

The Buy-and-Build Logic Explained

The buy-and-build strategy in HVAC is compelling for PE investors because of a specific financial dynamic called multiple arbitrage:

A PE firm acquires a platform company — say, a commercial HVAC services business with $20 million in EBITDA — at 10 times EBITDA, paying $200 million. The platform then acquires smaller add-on targets at 5 to 7 times EBITDA. When the PE firm eventually sells the larger, combined business, the total entity — now with $35 million in EBITDA from the combined operations — commands a premium multiple from a strategic buyer, perhaps 12 times EBITDA.

The arithmetic: the platform paid 5 to 7 times for EBITDA that the combined business sells for 12 times. The difference is captured as investment return, and it is substantial. This is why PE firms are aggressively pursuing add-on acquisitions in HVAC — each add-on creates value not just from the acquired earnings, but from the multiple expansion that size and platform premium generates at exit.

Examples From the Market

The abstract logic becomes concrete in the deals that are visible in HVAC in 2026:

• Air Control Concepts (Blackstone): Four acquisitions in under 18 months, each adding geographic coverage in the northeastern US data centre HVAC corridor. Each acquisition priced at a discount to the combined platform's implied valuation.

• PE-backed residential service platforms: Multiple PE-backed residential HVAC platforms — companies like the pre-franchise Service Experts and ARS — continue acquiring local and regional contractors as add-ons, particularly in markets where they do not yet have coverage and where acquired contractor customer relationships accelerate market entry.

• HVAC distribution roll-ups: SRS Distribution (Home Depot) is executing a distribution add-on strategy, acquiring Mingledorff's and other regional distributors to build national coverage. Winsupply's Central Corp acquisition follows the same logic. These distribution platforms are building at the same time that contractor platforms are building — creating an increasingly consolidated supply chain above the contractor level.

What Owners Should Do With This Information

For HVAC business owners who have not yet been approached by a PE-backed platform or an M&A adviser, the 44 percent add-on growth figure is a strong signal that outreach is coming — if it has not already arrived. Here is how to position your business advantageously:

• Document your financials meticulously: PE-backed acquirers conduct detailed due diligence on financial statements. Businesses with clean, audited or reviewed financials, consistent revenue recognition, and documented recurring revenue sell faster and at higher prices.

• Build your recurring revenue base now: Every service agreement customer you add before a sale process raises your recurring revenue percentage — the metric most directly correlated with transaction multiple. A business at 30% recurring revenue consistently commands higher multiples than one at 15%.

• Reduce owner dependency: Acquirers pay premiums for businesses that operate effectively without the founding owner present for every decision. Building a management team with defined responsibilities and documented processes reduces perceived transition risk.

• Don't sell on the first call: Direct approaches from acquirers — whether PE-backed platforms or strategic buyers — are rarely structured to maximise value for the seller. Engaging an M&A adviser experienced in HVAC transactions before negotiating directly ensures you understand the market for your business before committing to a price.

Frequently Asked Questions

What is a PE add-on acquisition in HVAC?

A PE add-on acquisition occurs when a private equity-backed platform company acquires a smaller business to expand geographic coverage, add capabilities, or increase market share. Add-ons are typically priced at lower multiples than platform companies and are the dominant deal type in HVAC equipment and services M&A.

Why is PE add-on activity growing in HVAC?

PE add-on activity in HVAC is growing because multiple arbitrage — buying smaller companies at 5 to 7 times EBITDA and selling the combined larger business at 10 to 12 times — is a highly efficient path to investment returns. The fragmented HVAC market provides an abundant supply of add-on targets, and the buy-and-build strategy has been validated repeatedly by successful exits.

How should HVAC business owners prepare for a potential PE acquisition?

Key preparation steps include maintaining clean, documented financial statements; building recurring service agreement revenue above 25% of total revenue; developing a management team with defined responsibilities that reduces owner dependency; and engaging an M&A adviser experienced in HVAC transactions before negotiating directly with any acquirer.

What multiple can an HVAC equipment business get in M&A?

HVAC equipment businesses are currently transacting at 6 to 10 times EBITDA for distribution businesses, 8 to 12 times for service businesses with strong recurring revenue, and 12 times or above for businesses with data centre or liquid cooling technology focus. Smaller add-on targets without strong recurring revenue typically transact at 4 to 7 times.