Why home services is a hot spot for PE add-ons—and what a sale process looks like for sellers

When something goes wrong with your home, it’s likelier than ever that the fix will come from private equity.

For several years now, the PE industry has been enamored with companies in the home services space, encompassing subsectors such as HVAC, plumbing, electrical, and roofing. These businesses tend to present a highly attractive profile to PE for a number of reasons.

• They have large customer bases and steady revenue streams

• The services they sell are a need, not a want, so pricing tends to be inelastic

• Their employees are often skilled, licensed tradesmen, resulting in a limited labor pool and strong defensibility from competition

The industry’s appeal has only strengthened in the age of AI. While some companies built on software face fears of an existential threat, home services companies are much more immune to AI-powered disruption, due to the literal nuts-and-bolts nature of the industry.

Thanks to these factors and more, PE activity in home services has been steadily increasing for much of the past decade, with annual deal count climbing 150% from 2020 to 2024.

“Home services remains a highly, highly investable sector [amid the AI boom],” says Raymond Gong, senior partner at Profitability Partners, a provider of fractional CFO services to home services companies. “Unless there’s a robot going into the field, you still need people. There’s going to be a lot of demand. I don’t see that changing anytime soon.”

The appeal of add-ons

Add-on transactions have assumed a particular prominence within this ongoing surge in home services, emerging as the primary way PE firms invest in the space.

In these deals, also known as roll-ups, a PE firm uses one company as a platform to acquire other companies and build a larger overall business able to achieve new economies of scale. Investors often consider the home services space to be uniquely positioned for such deals: It’s a heavily fragmented industry comprising many small, independent businesses run by technicians and tradesmen that are often ripe for new efficiencies.

Most appealing of all, when it comes time for PE owners to pursue an exit, a larger home services platform that has rolled up several smaller businesses can be worth more than the sum of its parts. In terms of multiples, buyers will typically pay a higher price for increased scale, which makes add-ons a critical tool for PE firms aiming to create value at their portfolio companies.

“As you build a bigger platform, there’s a significant multiple arbitrage opportunity,” Gong says. “A bigger platform is going to sell for a lot more on a multiple basis than a $5 million revenue operator.”

During the first half of 2026, more than 41% of all M&A deals in the HVAC industry were add-ons, the highest figure of the past four years. Within PE, add-ons in the HVAC space are today four times more common than investments in standalone platforms.

For the owners or employees at these home services businesses, the prospect of dealing with PE buyers for the first time can raise many questions. How does a deal process begin? What should you expect once it does? How do you get your company ready to sell? And what happens once a roll-up is complete?

“The people who run these home services businesses, they get inundated with outreach. The amount of outreach is unbelievable,” Gong says. “There’s definitely a right way to do it to make sure you’re getting the right exit price.”

How owners prepare for a sale

At Profitability Partners, Gong works closely with home services companies trying to achieve the best price in sale processes involving PE. It’s his view that business owners benefit from thinking ahead. Long before a sale process technically begins, there’s work to be done that can maximize company value.

“Owners should really start preparing their business three years out from when they pull the trigger,” Gong says.

This preparation can include multiple steps. At a basic level, Gong says companies should make sure their books are clean, accurate, and up to date. They should make sure they have proper visibility into their metrics. Then, they should go about trying to improve those metrics. Some of the key metrics Gong advises clients to optimize include profit margin, marketing spend, the percentage of revenue going to overhead, average revenue per job, and cost per sales lead.

Profit margin can perhaps have the largest impact on a company’s valuation. When a home services business is able to turn a profit more efficiently, it can become proportionately more attractive to potential PE buyers.

“If you don’t put in the work to improve your margin, you’re leaving value on the table,” he says.

The PE auction process

Once a company that’s pursuing an exit has put in the work to prepare itself for the market, it typically hires an investment banker or a broker to help run the sale process.

This is a standard step for companies across industries. But Gong says it can be particularly helpful in home services, where company leadership typically has little to no experience with navigating a complicated, high-stakes deal process.

“When you’re a technician, it’s just not what you do every day,” Gong says. “[The PE firms] have tons of resources. As a company owner, you’re not naturally positioned to really succeed as it pertains to a deal process.”

To help close that gap, he advises companies to find a broker with direct experience in home services—someone who is familiar with all the potential buyers in the market and has connections they can leverage to help find and construct the best deal.

From beginning to end, an auction process might last around six months, although exact timelines can of course differ. Typically, the process begins with the company’s broker compiling marketing materials to distribute to possible buyers. Once those materials go out, possible buyers are invited to submit bids, and bidders start to perform due diligence. Bidding unfolds over multiple rounds, until one buyer enters into exclusive negotiations and the final details of the transaction are ironed out.

The primary point of negotiation during this process is typically the price. Home services companies of different sizes and in different subsectors tend to be valued differently: A large HVAC business may fetch a multiple three times higher than a much smaller roofing company.

But other critical issues may be at question, too. Different bidders might have different strategic rationales for wanting to buy a business. How will that impact the post-merger business? Do they want the owner to stay on? What about the existing employees? Depending on the business owner’s goals, the answers might make a significant impact in deciding which bid to choose.

“Each buyer is going to treat your business a little differently,” Gong says. “Some people want the owner to stay on. Some buyers have a process to completely eliminate the owner from the business. It’s really a case-by-case basis.”

Life after an add-on

After a PE-backed platform company acquires a home-services business, the target typically undergoes some period of transition as it’s incorporated into the new platform.

As Gong says, the specific details of this process differ from one company to the next. But there are several types of changes that a company might expect new ownership to implement. These possibilities include:

• Consolidating back-office operations with the larger platform

• Optimizing the call center or other lead-generating aspects of the business

• Implementing new best practices in sales

• Adjusting pricing strategies

• Pushing for cross-selling across different businesses within the platform

For a home services business owner, completing an add-on sale to PE might represent the culmination of a life’s work. In other circumstances, it might represent the beginning of a new journey—one that will present new challenges of its own. If management is staying in place, Gong says it’s common for add-ons in this space to include some sort of earn-out or other contingency that incentivize the owner to remain motivated and involved.

Because no matter how much pre-deal prep work has been done or what kinds of post-transaction changes are put into place, the ultimate question of success or failure for a home-services company typically comes down to its people.

“Most of the time,” Gong says, “your labor is where the real value of the company comes from.”

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