Why PE Firms Are Buying Electrical And Roofing Companies

{{first_name}}, last week I had a conversation with an electrical contractor I have known for a long time. He does about $6M a year in sales. Good business. Profitable. Runs well.

A PE-backed platform company came to him out of nowhere with an offer. He had no idea who they were, why they were interested, or whether the number was good.

He asked me: "Why does a private equity firm want to buy a contracting company? That does not make any sense to me."

I hear that question a lot. And I understand why. Most trade contractors built their business one job at a time. They know their trade, but the world of institutional capital is foreign to them.

Here is the problem. If you do not understand why they want your business, you cannot negotiate intelligently. You might leave a lot of money on the table. Or walk away from a deal you should have taken. Or take one you should not have.

So let me explain exactly what is going on and what it means for you.

The PE Acquisition Playbook in Trades

Private equity firms have been buying roofing, HVAC, electrical, landscaping and plumbing companies at an accelerating pace since about 2018. The pace picked up sharply after 2021. Here is how their playbook works.

Step 1: They find a fragmented industry

Trade contracting is enormously fragmented. There are hundreds of thousands of HVAC, roofing, plumbing, and electrical companies across North America. Most of them are doing $1M to $20M in revenue and are owned by one person. No dominant player. No national brand. PE firms love this.

Step 2: They build a platform through one larger acquisition

Their first move is usually finding a platform acquisition, a company with $10M–$20M in revenue that becomes the foundation. This gives the PE firm a management team, a brand, and operating infrastructure to add onto.

Step 3: They add smaller companies as bolt-ons

After that, they go hunting for bolt-on acquisitions. These are businesses doing $1M to $10M in revenue. They pay lower multiples for these because of their size. They integrate them into the platform. Then the combined entity become worth significantly more than the sum of its parts.

Step 4: They improve margins through centralization

A standalone $4M roofing company might run at 10–12% EBITDA margin. A PE-backed platform can centralize accounting, dispatch, purchasing, and marketing across 15 companies. This improves the margins. Now, the whole platform starts generating 15–20% EBITDA. That is where the real money is.

Step 5: They sell the platform to a larger buyer

After 5–7 years, they sell the whole platform, now 15–25 companies operating under one brand to a larger PE fund, a strategic acquirer, or through an IPO. The multiple expansion is where the real return comes from. A fragmented group of $4M companies trading at 3–4x EBITDA becomes a $200M platform trading at 8–10x EBITDA.

The Honest Summary

PE firms are not buying your business because they love roofing or electrical work. They are buying it because fragmented industries with recurring demand are the raw material for a much bigger financial play. Your business is a building block.

PE Deal Volume in Trade Contracting from 2019 to 2025

What this means in plain terms for you, if your business is doing $1M in EBITDA and a PE bolt-on buyer offers you 4x, they may be planning to sell the combined platform at 8–10x. The arbitrage between what they pay you and what they eventually earn is the engine of their return.

That does not mean you are being cheated. All it means you need to understand the game being played.

This Week, Question I Want You to Ask Yourself

Is your business attractive enough to a strategic buyer or only to another owner-operator?

A PE buyer wants clean financials, transferable customer relationships, a management team that stays after the sale, and systems that do not depend entirely on you. An owner-operatory buyer wants something simpler, “a job that pays well”. The first type pays significantly more than the second type of buyer.

I want to add one more thing because this is practical and a lot of people get this wrong.

If a PE-backed company or a business broker representing them reaches out unsolicited, here is what I would do:

• Do not ignore the call. Even if you are not planning to sell, understanding what they see in your business is valuable intelligence.

• Do not share financials without a signed NDA. Any serious buyer will sign one without hesitation.

• Do not accept the first number. The first offer is rarely the best offer. It is a test.

• Do not negotiate alone. Get someone in your side who understands how PE buyers think and what comparable deals look like. That is the difference between a good outcome and a great one.

“The owners who get the best outcomes are not the ones who get lucky. They are the ones who were prepared before the call came in.”

The PE wave in trade contracting is not slowing down. If anything, it is accelerating as interest rates stabilize and capital comes back off the sidelines. You do not need to sell. You do not need to do anything differently today. But you do need to understand the environment your business operates in.

Knowing why PE firms want your type of business and what they are actually paying for is not just interesting. It is one of the most valuable things you can know if you ever decide to sell on your own terms.

Why am I Writing This?

I have spent 20 years working alongside construction and trade business owners across Canada. My firm N3 Business Advisors Inc. has helped hundreds of contractors buy, grow, value, and sell their businesses.

I started by career as a teacher and that part of me never left. So every Thursday morning I want to put one lesson in your inbox, for FREE; so you can build a business that institutional buyers want to buy. I don’t have any other motivation but to just share the lessons that I have learnt from other successful construction company owners.

If this was useful, please forward it to one owner who needs to hear it.

If it wasn't, reply and tell me why and also tell me what else would you like me to write about.

Nitin Khanna, CFA | Founder, N3 Business Advisors | Mastering the Business of Construction