What Makes a Roofing Business Attractive to PE-Backed Acquirers

When private equity-backed roofing companies look for businesses to acquire, there are several key traits they focus on. The companies that stand out often share commonalities that signal stability, growth potential, and scalability. Let's take a closer look at these traits and why they make a roofing business so attractive for acquisition, especially for firms like Infinity Home Services.

1. Revenue Over $10M, Preferably Over $20M

Size matters when it comes to acquisitions. A company with revenue exceeding $10 million, and ideally over $20 million, demonstrates that it has been able to grow and establish itself in its market. It often shows that the company has put the necessary systems and infrastructure in place to scale, whether that's through efficient operations, a strong leadership team, or a strategic growth plan. These businesses are more likely to have weathered challenges and proven they can sustain their performance over time. For private equity, a larger revenue base provides a stronger foundation for growth through both internal initiatives and add-on acquisitions. Additionally, larger companies tend to have more predictable cash flows, making them less risky for acquirers.

2. EBITDA Margins Between 12-17%

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a key measure of profitability. Roofing businesses that maintain EBITDA margins in the 12-17% range demonstrate financial health and operational efficiency. High margins allow acquirers to justify the premium often paid for quality businesses and present opportunities for scaling profits through operational improvements or synergies.

3. Steady Historical Growth

Historical growth tells a story of a business's trajectory. Roofing companies with a track record of steady growth show that they have been able to navigate changing markets, handle fluctuations in demand, and continue to expand. For private equity investors, this stability reduces risk and indicates that the company can thrive under new ownership.

4. Low Advertising Spend (Less than 5%)

A roofing company that spends less than 5% on advertising is often a sign that it benefits from strong organic demand, word-of-mouth referrals, and a loyal customer base. This implies that the business has established a solid reputation in the market. Acquirers prefer businesses that don't rely heavily on paid advertising, as it indicates long-term brand strength and customer trust.

5. An Attractive Market

The location of the business plays a crucial role in its attractiveness. Companies operating in markets with a high population, a large number of housing units, and strong economic fundamentals are more desirable. These markets offer more opportunities for growth and expansion, making them ideal for PE-backed buyers looking to scale operations.

6. Top 3 Provider in Their Market

Being one of the top three providers in a specific market suggests that the roofing company has a competitive edge. Whether it’s through better customer service, pricing, or brand recognition, this position makes the business harder to compete with, providing acquirers with a clear advantage in market share.

7. Strong Leadership and Culture

A company's leadership and culture are key indicators of its long-term success. Roofing businesses with strong, invested leadership who care about their community and employees stand out to private equity buyers. Leadership that focuses on ethical practices, employee well-being, and community engagement is an indicator that the business will continue to perform well after acquisition. Owners interested in growing and being part of a larger organization are especially attractive as they signal a smoother transition.

8. Good Customer Reviews

Positive customer reviews, especially on platforms like Google, are a strong sign of a reputable business. A company with a track record of satisfied customers is more likely to maintain its reputation post-acquisition. Private equity firms value this social proof, as it speaks to the company's reliability, quality of work, and ability to generate future business.

9. Over 20 Years in Business

Longevity is a testament to a company’s resilience. A roofing business that has been around for over 20 years has weathered various economic cycles and industry challenges. This endurance gives acquirers confidence in the company's stability and ability to remain successful in the long term.

Specific Criteria for Infinity Home Services

At Infinity Home Services, we look for companies that meet general acquisition criteria but with a few additional factors that fit our strategic focus. These include:

• 80%+ of Revenue from Roofing: We are primarily focused on businesses that specialize in roofing, as it aligns with our core service offerings.

• Less than 10% of Revenue from Insurance Restoration: Companies heavily reliant on insurance work can be volatile, so we prefer businesses where insurance restoration is a smaller portion of the revenue.

• Less than 10% of Revenue from New Construction: Roofing businesses involved in new construction tend to have longer project cycles and are more sensitive to market fluctuations, which we aim to minimize.

• Less than 15% of Revenue from Commercial: While commercial roofing can be lucrative, we prioritize businesses focused on residential roofing due to its consistency and scalability.

By focusing on these commonalities and specific criteria, PE-backed firms like Infinity Home Services ensure that the businesses we acquire have the qualities needed for sustainable growth and long-term success. If you're a roofing contractor looking to understand your company's value, these are the key areas that potential acquirers will examine.

If you're a roofing contractor and want to understand what your business could be worth, head over to our free business valuation page. We've designed this tool specifically for roofing companies to help you get a clearer picture of your company's value. By filling out a few key details, you'll receive insights on where your business stands and whether it meets the criteria for acquisition by PE-backed firms like Infinity Home Services. Whether you're thinking about selling or just curious about your business's potential, this is a great starting point.