Question 1

What is a PE roll-up strategy?

Accepted Answer

A PE roll-up involves a private equity firm acquiring a series of businesses in the same industry and combining them into a larger, more valuable entity. PE firms buy smaller companies at 4x–6x EBITDA individually, combine them into a platform worth 8x–12x EBITDA, then sell the platform for the multiple arbitrage gain. Home services is ideal for this because the market is fragmented — thousands of small owners, limited regional players.

Question 2

What size home service business attracts PE buyers?

Accepted Answer

Platform deals (first acquisition in a market): $500K+ EBITDA. Add-on acquisitions (bolt-on to existing PE platform): $200K–$500K EBITDA. Below $200K EBITDA, most PE firms don't have enough to work with after management costs. However, some geographic adjacency deals happen at lower EBITDA if the routes or customer base fit perfectly.

Question 3

Which verticals have the most PE activity?

Accepted Answer

Highest PE activity: pest control, HVAC, landscaping/lawn care. Strong PE activity: plumbing, pool service, fire/water restoration, commercial cleaning. Growing PE interest: electrical, chimney, gutters, painting. Low PE activity currently: roofing (residential), moving, locksmithing. PE enters verticals with recurring revenue, essential services, and fragmented ownership.

Question 4

What do PE firms look for beyond EBITDA?

Accepted Answer

PE buyers analyze: management team depth (can they grow without the owner?), recurring revenue percentage (predictable cash flow), route/geographic density (efficient operations), customer concentration risk, technology infrastructure, growth potential in their market, and whether your business fits their existing platform footprint.

Question 5

What is an 'add-on' vs. a 'platform' acquisition?

Accepted Answer

A platform acquisition is a PE firm's first major acquisition in a vertical/geography — the anchor business around which they build. Platform companies get higher multiples (5x–7x EBITDA) because they're setting the foundation. Add-on acquisitions are subsequent purchases bolted into the existing platform — typically at slightly lower multiples (4x–6x EBITDA) but with faster closing timelines.

Question 6

How do I get in front of PE buyers?

Accepted Answer

PE firms don't respond to cold outreach. The most effective path: work with a broker who has existing relationships with PE platforms in your vertical. A broker runs a structured process that contacts 15–25 qualified PE buyers simultaneously, creating competitive dynamics. Direct outreach to PE firms almost always goes unanswered or results in a low-ball offer.

Question 7

What is an earnout in a PE deal?

Accepted Answer

An earnout is a portion of the purchase price paid in the future, contingent on the business hitting specific performance targets after closing. PE firms use earnouts to bridge valuation gaps and to align seller incentives during the transition period. Earnouts can add 10–30% to the headline price but come with risk — you only collect if targets are met.

Question 8

Do PE buyers want me to stay involved after the sale?

Accepted Answer

Often yes, for 12–36 months. PE firms typically want the seller to assist with the transition — customer introductions, employee retention, knowledge transfer. Some deals include equity rollover, where the seller reinvests a portion of proceeds into the new entity and participates in the platform's future upside.

Question 9

How long does a PE deal take to close?

Accepted Answer

PE transactions typically take 90–150 days from LOI to close. The timeline includes LOI negotiation (2–3 weeks), due diligence including QoE report (45–60 days), purchase agreement negotiation (2–3 weeks), and regulatory/lender approvals (2–4 weeks). PE deals take longer than individual buyer deals but are more reliable once under LOI.

Question 10

What is 'quality of earnings' and when does PE require it?

Accepted Answer

A Quality of Earnings (QoE) report is an independent financial analysis by a third-party accounting firm that verifies your SDE/EBITDA and all add-backs. PE buyers almost always commission a QoE report. It costs $15K–$50K (paid by the buyer). As a seller, your financials need to withstand this scrutiny — clean books and documented add-backs are essential.

Question 11

Can PE buyers acquire my business confidentially?

Accepted Answer

Yes. PE firms are accustomed to confidential transactions. They sign NDAs before receiving your financials, conduct site visits discreetly, and typically don't require employee or customer contact until after an LOI is signed. Your employees and customers should not know the business is being sold until after signing.

Question 12

What's the difference between selling to PE vs. an individual buyer?

Accepted Answer

PE: higher multiples (5x–9x EBITDA), longer process, more diligence, possible earnout and equity rollover, often want seller to stay involved. Individual: lower multiples (2.5x–4x SDE), faster close, SBA financing (10% buyer down payment), typically want seller to exit cleanly. Both are legitimate — the right choice depends on your goals, business size, and appetite for earnouts.

Selling to Private Equity: 12 Questions Answered

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