Two HVAC companies can report the same revenue and the same EBITDA and sell for very different money. One of them fits boilers, heat pumps and air conditioning systems, invoices on completion and starts the next year at zero. The other does the same work but leaves behind a maintenance agreement on every system it installs, and begins each year already knowing where a large part of its income will come from.
Buyers pay a substantial premium for the second business, and they pay it for a simple reason: installation revenue has to be won again every January, while a service book renews itself. In a sector where installation volumes are driven by subsidy policy and can move by tens of percent in a single year, that difference is the whole valuation argument.
This article sets out how the premium is calculated, what buyers actually test in a service book, how F-gas certification affects a sale, and what an owner should fix in the year before going to market.
Published ranges in this sector vary widely by size and by mix, and they should be read as indicative rather than precise. Owner-operated businesses running a handful of vans are commonly discussed in low single digits of owner earnings. Mid-market commercial service operators with a real contract base are typically quoted around 5x to 8x EBITDA. Businesses large enough to serve as a platform for a consolidator — several million of EBITDA, density across more than one region — are quoted higher still.
The consistent finding across those benchmarks is the mix effect. A project-heavy mechanical contractor with thin service revenue sits at the bottom of the range. A service-led operator with documented maintenance agreements sits at the top. The broadly cited threshold is that once multi-year maintenance contracts exceed roughly 30% of revenue, buyers begin paying one to two additional turns of EBITDA, and penetration above 40% is what moves a business into platform territory.
Two turns on a mid-single-digit multiple is not a refinement. It is the difference between five and seven, which on the same earnings is a price roughly 40% higher for work the business is already doing. That is why the sensible preparation question is not how to grow revenue before a sale, but how to convert more of the existing revenue into contracted maintenance. At Conclave Partners we would rather see a flat year with the service share up ten points than a growth year built entirely on installations.
Owners routinely overstate their recurring revenue, usually in good faith. Buyers apply a narrow definition, so it pays to apply it first.
Contracted maintenance agreements count. These are written, have a term, specify the scope and the visit frequency, and carry a price and a notice period. They are the asset.
Repeat callout work does not count, however loyal the customer. Reactive repairs for a client who has used you for a decade are valuable and worth presenting, but they are not contracted and a buyer will treat them as ordinary trading revenue.
Warranty labour paid by a manufacturer sits somewhere in between: predictable while the warranty population lasts, but tied to equipment you installed rather than to an agreement with the customer, and declining unless replaced.
Monitoring, remote controls and building management contracts count where they are written and paid for. They are also worth separating out, because their margins usually differ from mechanical maintenance.
The practical step is to report the split monthly and consistently: contracted maintenance, reactive service, installation, and any equipment supply. Two years of that presentation, reconciled to the accounts, is worth more in a negotiation than any assertion about customer loyalty.
The reason buyers discount installation revenue is not snobbery about project work. It is that the volumes are visibly outside the contractor's control.
European heat pump data illustrates the point precisely. Sales across nineteen European countries fell around 22% in 2024 against the previous year, with Czech volumes down 64% and German volumes down 48%, while the UK rose 56% in the same period. The following year the direction reversed: sales rose about 11% across sixteen countries in 2025, to roughly 2.63 million residential units from 2.38 million, with twelve of the sixteen markets growing, the UK up 27% to about 125,000 units and Belgium up 7% to around 111,000 — while Poland and France fell. The installed base across Europe now stands at roughly 28 million units, and penetration remains wildly uneven: over 30 units per 1,000 households annually in Norway, Finland and Sweden against under five in Poland and the UK.
Those swings track subsidy schemes, budget decisions and public messaging rather than anything an installer did. A buyer underwriting an installation-led business is underwriting the next government's spending decisions. A buyer underwriting a service-led business is underwriting equipment that needs maintaining regardless.
There is a second, more encouraging reading for sellers. An installed base of 28 million heat pumps is a maintenance market that did not exist at that scale a decade ago, and every unit fitted during the boom years is now equipment somebody has to service. Contractors that converted installation work into maintenance agreements are harvesting that; those that did not have handed the aftermarket to whoever asked the customer first.
A list of contract names proves nothing. Buyers examine five things, and each of them is a document rather than an assertion.
Renewal rate is the first, measured over at least three years and calculated the same way each time. A book renewing above ninety per cent is a different asset from one renewing at seventy, and the difference compounds.
Contract terms come second. Length, notice period, automatic renewal mechanics, and whether the agreement allows an annual price increase — ideally indexed. Agreements without an escalation mechanism lose value every year in real terms and buyers price that.
Assignability is third and is frequently overlooked. Contracts requiring customer consent on a change of ownership are worth materially less than those that transfer automatically, and in an asset sale they may need to be novated one by one. This is worth checking before launch, not during diligence.
Margin per contract is fourth. Buyers want to see that maintenance agreements are profitable on their own terms, not loss-leaders priced to win installation work. A book that only makes sense because it generates callouts should be presented as exactly that, honestly, with the callout revenue attached.
Geographic density is fifth. Fifty contracts within thirty minutes of the depot are worth more than eighty scattered across a region, because the labour cost of serving them is lower and the route can absorb more work without more vans.
In our experience at Conclave Partners, sellers who can produce these five items as standing monthly reports rather than as a diligence exercise complete faster and defend their price better than those who cannot.
Regulatory standing is an asset in this sector and a specific diligence item in Europe.
Under the EU F-gas Regulation 2024/573, both technicians and companies handling fluorinated greenhouse gases must be certified, and the requirements were tightened relative to the previous regime. Certification now extends to work involving alternatives, including HFOs and natural refrigerants, so the scope covers most modern equipment rather than only legacy systems. Certificates are valid for a limited period — seven years — after which further evaluation or training is required.
Operators must also keep written records for five years covering the type and quantity of gas in each system, charge size, dates and results of leak checks and repairs, and the identity and certification details of the personnel and company performing the work.
The item that matters most in a 2026 transaction is the deadline: existing certifications must be brought into line with the new EU standards by 11 March 2027. A buyer is therefore acquiring a workforce whose qualifications all need re-validating within months of completion. Sellers who have already mapped every engineer's certificate, its expiry and the re-certification plan turn a diligence risk into a non-issue. Sellers who have not invite the buyer to price the cost and disruption of doing it themselves.
The binding limit on an installation and service business is rarely demand. It is qualified people.
Buyers therefore examine headcount by qualification, average tenure, notice periods, apprenticeship pipeline and the ratio of employed engineers to subcontracted labour. A business delivering its service book largely through subcontractors is a different proposition from one with its own certified staff, because the subcontractors are also available to competitors.
Two dependencies are priced sharply. The first is the owner who still holds the technical qualifications the company operates under — an arrangement that must be resolved before a sale, not discussed during one. The second is the service manager or lead engineer who personally holds the customer relationships and the scheduling knowledge. Their retention, and their contracts, become material terms.
The installation half of the business brings the balance sheet problems familiar from contracting.
Work in progress on part-finished installations is estimated, and buyers rebuild it: costs incurred, cost to complete, amounts invoiced. Over-billing on staged jobs is treated as a debt-like item and deducted from the price.
Deposits taken for equipment not yet fitted are an obligation, not cash, and get the same treatment.
Warranty and defects liability on completed installations follows the system for years. Buyers examine the historic claims record, the labour warranty offered as standard, and whether manufacturer-backed warranties depend on continued certification — some do, which links this section back to the previous one.
Retentions on commercial contracts sit on the balance sheet and should be collected before a sale rather than presented as an asset a buyer will pay for at face value.
Consolidators dominate this sector, and their appetite is built specifically around service books. They are buying route density, contracted revenue and certified engineers, and they pay accordingly when those three things are documented. They also move quickly when the data is clean.
Trade buyers — larger regional contractors, mechanical and electrical groups, energy services companies — buy for capability, geography or client access, and may pay well for a specialism they lack.
Manufacturers and distributors occasionally acquire installers to secure a route to market or an aftermarket base, particularly in heat pumps.
Management buy-outs work here when the service book is genuinely institutional rather than personal, since the incoming team already understands what it is buying. Establishing which of these routes a specific business realistically has, before any materials are written, is where Conclave Partners spends the first weeks of an HVAC mandate.
Convert installations into maintenance agreements as standard. Every system fitted in the next twelve months should leave with a written contract attached. This single habit changes the mix, and the mix changes the multiple.
Put the service book on paper. Written agreements with terms, notice periods, price escalation and assignment provisions, replacing informal arrangements. Where a customer will not sign, record that too.
Report the revenue split monthly — contracted maintenance, reactive, installation, equipment — reconciled to the accounts, for at least twenty-four months.
Calculate and publish the renewal rate on a consistent definition, with the churn explained.
Map certification. Every engineer, every certificate, every expiry date, and a written plan for the March 2027 re-certification requirement.
Resolve any qualification held personally by the owner, and document pricing authority and customer relationships held by individuals.
Clean the balance sheet: collect retentions, provide for loss-making installation jobs, and separate customer deposits from cash.
Normalise the accounts honestly, including a market salary for your own role and personal costs run through the company. Adjustments a buyer can verify are accepted; adjustments supported only by the owner's word cause the buyer to discount the entire earnings figure. Sellers who ask Conclave Partners where to begin are pointed at the revenue split and the contract file, because those two documents determine which multiple the business is even eligible for.
A prepared business typically takes six to nine months from launch to completion — faster than general contracting, because the contract review is lighter and the earnings are steadier, and because consolidators in this sector are experienced acquirers who know what they are looking for.
Diligence concentrates on the service book, the certification position and the engineer roster. Expect a buyer to sample contracts rather than read all of them, which makes the consistency of your reporting more important than its volume.
Confidentiality deserves attention. Engineers are in short supply and are actively recruited; a leaked process is an invitation to competitors.
Ranges quoted in the market run from low single digits of owner earnings for small owner-operated firms to around 5x to 8x EBITDA for mid-market commercial service operators, with platform-scale businesses quoted higher. The dominant variable is the mix: maintenance agreements above roughly 30% of revenue attract one to two additional turns, and penetration above 40% is generally what qualifies a business as a platform.
Because it recurs without being won again, and because installation volumes are driven by policy. European heat pump sales fell about 22% in 2024 and rose about 11% in 2025 — swings that reflect subsidy decisions rather than contractor performance. Maintenance income is largely insulated from that.
It depends on the wording. Agreements that transfer automatically are worth materially more than those requiring customer consent on a change of control, and in an asset sale contracts may need to be novated individually. Reviewing assignment provisions before launch is one of the higher-return preparation tasks available.
It is a diligence item with a deadline. Regulation (EU) 2024/573 requires certification for both technicians and companies, extends it to alternative refrigerants, limits certificates to seven years and requires five-year record-keeping. Existing certifications must meet the new EU standards by 11 March 2027, so a buyer is acquiring a workforce that needs re-validating. Having the register and the plan ready removes the issue.
Yes — but attach a maintenance agreement to every installation. Installation work that generates contracted aftermarket is building the asset the buyer is paying for. Installation work that ends at handover is simply this year's revenue.
Roughly six to nine months from launch to completion for a prepared business. The preparation that changes the price — shifting the revenue mix towards contracted maintenance and documenting the service book — takes a further twelve months to show in the numbers.
Ildar Zakirov — Conclave Partners ildar@conclavepartners.com
Sergi Kosiakof — Conclave Partners sergi@conclavepartners.com