Quick answer: Buyers value an HVAC or plumbing products manufacturer on adjusted EBITDA and on how defensible the product line is. They examine the mix of new construction, replacement and aftermarket parts, wholesale distributor and contractor loyalty, component and metals costs, warranty exposure, product certifications, and the capital needed to meet changing efficiency and refrigerant rules. Replacement demand and parts are valued above purely new-construction volume.
Key points
- Standards change. Efficiency and refrigerant rules for equipment evolve, and buyers ask what redesign, recertification and tooling the product line needs and who pays for it.
- Replacement and aftermarket revenue is steadier than new construction. Buyers separate the installed-base income from project-driven sales.
- Wholesale distributors and contractors decide what gets sold and installed. Loyalty, concentration and exclusivity are tested.
- Warranties on compressors, heat exchangers and other components can be expensive. Reserves are compared with the claims record.
A regulated, replacement-driven product
Heating, cooling and plumbing products sit in nearly every building, and they are replaced when they fail or when owners upgrade. Because the installed base is large, a significant part of demand follows the age of equipment, not new construction. Weather also matters: hot summers and cold winters drive repair and replacement.
The products are also regulated. Efficiency standards, safety listings and refrigerant rules change over time, and each change can force a redesign, new testing and new tooling, or create demand for compliant products. Buyers want to know where the company stands on each requirement and what it will cost to remain compliant.
Public-market reference data
Neither of the two nearby public groups is specific to HVAC or plumbing products. The January 2026 data for the building materials group, covering 41 US-listed firms, shows an enterprise value to EBITDA multiple of 11.6x, and the machinery group, covering 105 firms, shows 16.2x and an EBITDA margin of 19.6%.[1][2]
Public-company reference data, United States, as of January 2026[1][2]
| Damodaran industry group | US-listed firms | EV / EBITDA | EV / EBIT | EBITDA margin | Gross margin |
|---|---|---|---|---|---|
| Building Materials | 41 | 11.6x | 16.0x | 17.3% | 30.9% |
| Machinery | 105 | 16.2x | 21.0x | 19.6% | 37.5% |
The multiples cover companies in each group that have positive EBITDA; the margins come from the same author's separate margin dataset for the same industry groups. Most private companies are smaller, less liquid and less diversified than these public companies, so private-company transaction multiples differ, and often sit below them. Neither group is specific to heating, cooling or plumbing products, and both include much larger companies, so they are loose proxies for a smaller manufacturer.
Both groups include much larger and more diversified companies than a typical private manufacturer of mechanical or plumbing products. They illustrate how the public market prices building and industrial equipment earnings. The guide to valuation multiples explains how buyers adjust.
What buyers examine
Demand mix. Revenue from new construction, replacement, repair and aftermarket parts, and from residential and commercial buildings. Replacement and parts are generally more resilient than new construction, but the figures should show it.
Product regulation and certification. The status of each product against current and upcoming efficiency, safety and refrigerant requirements, test reports and listings, and the plan and cost for products that need changes. Inventory of products that may become non-compliant is reviewed for write-down risk.
Channel. Wholesale distributors, contractors, retailers, original equipment customers and direct sales. The share through the largest partners and the strength of each relationship.
Components and materials. Compressors, motors, controls, electronics, copper, aluminum, brass and steel. Buyers study supplier concentration, lead times and the company’s record of passing through cost changes.
Warranty. Terms by product and component, claims history, reserve method and the process for service. Buyers estimate the cost of claims on products still under warranty and compare it to the reserve, as in the window and door manufacturer discussion.
Manufacturing and capital needs. Plant capacity, automation, tooling and quality performance. A needed investment in new tooling is treated as a cost the buyer will bear.
Service and technical support. Training for contractors, technical hotlines and spare parts availability support loyalty and also cost money.
Seasonality. Weather affects demand by month and region. The working capital peg guide explains why timing the close matters.
Adjustments
Besides the owner items in the add-back guide, buyers examine one-time costs of redesign and certification, metal and component price swings, recalls or field fixes, inventory write-downs and the treatment of distributor incentives. Costs of compliance projects that will continue are treated as recurring.
Illustrative example: The cost of the next standard
A manufacturer has adjusted EBITDA of $3,000,000. One of its main product lines will need a redesign and recertification to meet a new requirement, which the company estimates at $2,000,000 of engineering, tooling and testing over the next two years. The existing design cannot be sold after the compliance date. The seller values the business at an illustrative 6.0x, or $18,000,000. The buyer deducts the $2,000,000 as a cost it must fund to preserve the earnings, and offers $16,000,000. If the seller has already completed part of the redesign, the deduction is smaller. The numbers are invented to show the reasoning and are not benchmarks.
Who buys
Strategic buyers include larger HVAC and plumbing manufacturers adding product lines and channels, building products groups, and distributors integrating into manufacturing. Private equity firms acquire manufacturers with proprietary products, strong aftermarket revenue and a path to improve operations. Buyers may link part of the price to the transition through a new standard, as the earnout guide describes, when the outcome is uncertain.
Preparing for a sale
- Prepare revenue and margin by product, channel and end use, with parts shown separately.
- Document the status of each product against current and announced requirements, and the plan to comply.
- Summarize the largest distributors and contractor programs.
- Prepare a component and materials cost history, with suppliers and contracts.
- Compile warranty claims by product and component, with the reserve method.
- Show certifications, test reports and recalls or field actions.
The quality of earnings guide shows how buyers test the results, and the industrials and building products series covers related industries.
Frequently asked questions
Why do changing standards matter to a valuation?
Because they can make existing designs obsolete, require new testing and certification, and create stranded inventory. They can also create replacement demand and favor companies that are ready. Buyers ask which products meet current and announced requirements, what the transition plan costs and how the company has handled past changes.
How do buyers treat aftermarket parts?
As a more reliable earnings stream than equipment sales, particularly where the company’s products are specified by contractors and the installed base is large. They examine parts revenue as a share of the total, its margin, the ordering channels and the risk of competing replacement parts.
What is the role of the distributor?
Distributors stock and sell products to contractors, and their preferences shape what contractors install. Buyers look at how much of sales goes through a few distributors, what exclusive or preferred arrangements exist, and what would happen if a large distributor changed its supplier.
Are product certifications important in diligence?
Yes. Safety listings and performance ratings are often required to sell and install a product. Buyers confirm that certifications are current, that testing records are complete and that changes to products have been properly evaluated.
Need a valuation you can use in a sale or acquisition decision?
The Impetus Group prepares transactional valuations from the standpoint of strategic and financial buyers. A valuation is a standalone engagement with its own scope and fee, and it can be the first step before a sale or acquisition process.
Related guides
- EBITDA Add-Backs: What Buyers Accept and What They Reject: Learn which EBITDA add-backs buyers accept in a sale, which they reject, and how adjusted EBITDA changes enterprise value, with a worked illustration.
- Net Working Capital Peg: How the Working Capital Adjustment Works: The working capital peg sets the level of working capital a seller must leave in the business at closing. See how it is calculated, negotiated and adjusted.
- Customer Concentration and Valuation: How Buyers Price the Risk: Why buyers pay less for businesses that depend on a few customers, how they measure concentration, and what owners can do to reduce the discount before a sale.
- Quality of Earnings Report: What It Is and What Buyers Test: A quality of earnings report tests whether a company’s reported profit is real and repeatable. See what buyers examine, how it affects price and how sellers prepare.
More in industrials and building products
- Electrical and lighting products manufacturers: How buyers value electrical and lighting makers: specification channels, sales reps, price erosion, certifications, sourcing and why public multiples mislead.
- Building products distributors: How buyers value building products distributors: supplier agreements, branch economics, inventory inflation, contractor credit, working capital and multiples.
Sources
- Enterprise Value Multiples by Sector (US), data as of January 2026. Aswath Damodaran, NYU Stern School of Business. Accessed October 8, 2026.
- Operating and Net Margins by Sector (US), data as of January 2026. Aswath Damodaran, NYU Stern School of Business. Accessed October 8, 2026.
This guide is general education. It is not a valuation opinion, appraisal, investment advice, or legal or tax advice. How these guides are made.