What EBITDA multiple should a restoration company expect in a PE sale?

Restoration companies at the $3M–$10M EBITDA level typically transact at 5× to 8× EBITDA in current market conditions. Companies above $10M EBITDA, with strong TPA program relationships and documented job-level margins, may command 8× to 12×. The multiple is heavily influenced by revenue quality (recurring vs. project-based), EBITDA margin (25%+ commands premium), financial documentation quality, and whether you're running a competitive process.

What is rollover equity in a PE transaction?

Rollover equity means you reinvest a portion of your sale proceeds into the acquiring entity. A typical deal might be 70% cash at close and 30% rollover. The rollover is worth something only if the PE firm successfully grows and exits the platform at a higher multiple. This is sometimes called the 'second bite of the apple' — and sometimes it's worth more than the initial transaction. But it carries real risk: if the PE firm's platform doesn't perform, your rollover equity may be worth little.

What is an earnout and should I accept one?

An earnout is a portion of the sale price that's contingent on the business meeting future performance targets — usually revenue or EBITDA targets over 1–3 years post-close. Earnouts are common in restoration acquisitions but carry significant risk: after the sale, you may have limited control over decisions that affect whether targets are met. As a rule, minimize earnout exposure and maximize cash at close. If earnout is required, ensure the targets are achievable under the most conservative operating scenario, not the buyer's growth projections.

How do I know if the PE offer is fairly priced?

You need comparables. Restoration industry M&A transaction data is available through brokers, through industry conferences (RIA, RCDA), and from investment bankers who specialize in the sector. A quality M&A advisor will tell you where the offer sits relative to comparable transactions and whether the market would support a higher price. Never accept a first offer without knowing whether a competitive process would produce a better outcome.

Should I run a competitive sale process or negotiate with a single buyer?

Always run a process if you can. Even a soft competitive process — reaching out to 3–5 strategic and financial buyers simultaneously — typically produces a 15–25% better outcome than exclusive negotiation with a single buyer. The exception is if the single buyer has a genuine strategic reason to pay a premium and you have a relationship that gives you confidence in the process. Running a process requires preparation and a good M&A advisor, but the economics almost always justify it.

What are the tax implications of a restoration company sale?

This is highly structure-dependent. Asset sales (most PE transactions) are often taxed as ordinary income on some components and capital gains on others. Stock sales may qualify for long-term capital gains treatment but buyers typically prefer asset deals. Section 1202 (QSBS) exclusion, installment sale elections, and opportunity zone reinvestment are all strategies that may apply. This requires dedicated CPA and tax attorney advice specific to your situation — not a general framework answer.

Should You Accept That PE Acquisition Offer? A Restoration Owner's Decision Framework

▸ Framework Answer

Accepting a PE acquisition offer is one of the most consequential decisions you'll make. The framework answer is not "take it" or "don't take it" — it's a structured evaluation across six criteria that most owners don't fully work through before deciding.

Accept (or run a competitive process to refine the offer) if: the headline multiple is within 20% of comparable transactions, at least 70% of the consideration is cash at close, the post-sale role is one you can genuinely commit to for the required term, and the after-tax proceeds create the personal financial outcome you need.

Don't accept (yet) if: you haven't run a competitive process, the cash-at-close percentage is below 60%, the earnout is more than 20% of total consideration, or you haven't modeled the personal after-tax outcome.

The honest context: The PE roll-up of restoration companies is accelerating. The window of premium multiples won't be open indefinitely. But rushing a sale — taking the first offer without a proper process — is one of the most common and costly mistakes restoration owners make.

Why This Is the Most Complex Decision in the Framework Series

The bookkeeping outsource decision is mostly arithmetic. The QuickBooks switch decision is mostly configuration. The PE acquisition decision is different: it's financial, personal, strategic, and irreversible.

Once you've sold, you've sold. The structure of the deal determines your next 3–5 years. The tax treatment determines what you actually keep. The post-sale role determines whether you spend those years running the business you love or fighting the bureaucracy of a PE-owned platform.

This framework won't make the decision for you. It will ensure you've thought through what you're actually agreeing to — not just the headline number.

The PE Offer Decision Framework

PE Offer Evaluation — Six-Criteria Framework

| Criterion | Reconsider | Gray Zone | Proceed / Negotiate | |---|---|---|---| | Headline multiple vs. comparables | More than 25% below market | 10–25% below market | At or above market | | Cash at close (% of total consideration) | Under 55% | 55–70% | 70%+ | | Earnout as % of total consideration | Over 30% | 15–30% | Under 15% | | Post-sale role alignment | Misaligned (wrong title, authority, timeline) | Partially aligned | Fully aligned with your plans | | Personal after-tax outcome | Doesn't meet retirement needs | Meets minimum needs | Exceeds needs | | Alternative paths available | Several strong alternatives | Some alternatives | Few better alternatives |

Using the matrix: If 4 or more criteria land in "Proceed / Negotiate," you have the basis for a transaction. If 3 or more land in "Reconsider," don't accept without significant renegotiation or walking away to pursue alternatives.

The Framework: Six Criteria in Detail

Criterion 1: The Headline Multiple vs. Comparable Transactions

What it measures: Whether the offered multiple reflects current market pricing for restoration companies at your scale.

Current market context (2025–2026): Restoration companies at the $3M–$10M EBITDA level are transacting at 5× to 8× EBITDA. Premium multiples (8× to 12×) are achievable for companies with:

EBITDA margins above 25%
Documented job-level P&L history
Diverse revenue mix (multiple TPA programs, direct carrier, commercial)
Strong management team not dependent on the owner
Clean financial statements for 2–3 years

Companies with weak financials, owner-dependent operations, or limited TPA program diversification transact at the lower end of the range.

The EBITDA calculation problem: PE buyers normalize EBITDA by adding back owner compensation, owner-adjacent expenses, and one-time costs. But the addbacks they accept are negotiated, not given. Know your EBITDA under both your definition and the buyer's definition before you receive an LOI. The gap between those two numbers is often significant.

What to do: Hire an M&A advisor who has specific restoration industry transaction experience. They will tell you where the offer sits relative to current market. Never rely solely on the buyer's representation of market pricing.

Criterion 2: Deal Structure — Cash at Close vs. Deferred Consideration

What it measures: How much of the headline number you actually receive at close, and how much depends on future performance or continued employment.

The components of a typical deal:

Cash at close: The portion you receive on signing day. This is the only guaranteed money.
Rollover equity: Your ownership stake in the combined entity post-close. It pays if the platform succeeds; it may be worth little if it doesn't.
Earnout: Contingent payments based on hitting future performance targets.
Seller financing / notes: Deferred payments from the buyer over 2–5 years.
Management equity: New equity granted to you as part of staying on in a management role.

The rule of thumb: Maximize cash at close. Every dollar that moves from cash at close to deferred consideration adds risk and complexity. Rollover equity is not a guarantee. Earnouts are harder to collect than buyers represent. Seller notes carry counterparty risk.

Realistic cash at close target: For a well-run competitive process, 70–85% cash at close is achievable. An initial offer with 50–60% cash at close is a negotiating position, not a final offer.

Criterion 3: Earnout Structure and Risk

What it measures: Whether the contingent portion of the deal is achievable under realistic operating conditions after the sale.

Why earnouts are risky:

After the sale, you have less control than you think. The PE firm makes decisions about pricing, hiring, TPA program mix, capital allocation, and overhead that directly affect whether you hit your earnout targets. You may be required to grow 30% to earn the contingent payment in a year when the platform's decisions create headwinds you can't control.

Questions to ask before accepting an earnout:

What happens to the earnout if the PE firm sells the platform before the earnout period ends?
What happens if the PE firm changes your territory, redirects leads, or changes your overhead structure?
Are the targets based on revenue or EBITDA? (EBITDA targets are riskier because you control less of the cost structure post-sale.)
Is there an acceleration clause if targets are exceeded early?

The framework rule: Treat any earnout above 15% of total consideration as a red flag requiring renegotiation. Every percentage point in earnout that you can convert to cash at close is a guaranteed improvement to your outcome.

Criterion 4: Post-Sale Role Alignment

What it measures: Whether the role they're asking you to play for 2–5 years after the sale is one you can commit to — and one you'll be happy in.

What PE firms typically require:

Continued management of the business for a defined period (typically 2–5 years)
Achievement of specific growth targets
Reporting into a PE-appointed CEO or operating partner
Approval required for capital expenditures above a defined threshold
Compliance with platform-wide reporting and process requirements

The questions to answer honestly:

Can you operate as an employee within a structure you don't fully control for 3–5 years?
Are the growth targets they're asking you to commit to realistic given what you know about the business?
Is the title and authority structure something you can live with?
What happens if there's conflict between your operating philosophy and the PE firm's direction?

The honest observation: Many restoration owners who sell to PE firms report that the post-sale period is more difficult than they expected. The loss of autonomy is real. The cultural change when a growing platform imposes process and reporting on an owner-operated business is significant. This isn't a reason not to sell — but it's a reason to go in with eyes open.

Criterion 5: Your Personal Retirement Readiness

What it measures: Whether this transaction, net of taxes and post-sale commitments, produces the financial outcome you actually need.

The personal financial model: Before accepting any offer, build the following model:

Gross proceeds at the headline multiple
Less: deal costs (M&A advisor fee, legal fees, accounting fees — typically 3–5% of deal value)
Less: taxes (this requires a CPA; tax treatment depends on deal structure, your tax basis, and your state of residence — don't estimate this without professional help)
Net after-tax proceeds
Of that, how much is immediately liquid? (cash at close minus taxes and fees)
How much is deferred (rollover, earnout, seller notes)?
Does the liquid portion create the financial security you need?

The hard question: If the deal requires you to stay on for 4 years to earn the full consideration, are you committing to 4 more years of running this business? For some owners, that's fine. For others who are ready to step back, the structure doesn't match the intention.

Criterion 6: Alternative Paths

What it measures: Whether you have better options than accepting this offer at this time.

The alternatives:

Hold and grow. If your current EBITDA is $1.5M and you can get it to $3M in 2–3 years, the improvement in absolute dollar value (even at the same multiple) is significant. Growing from $1.5M to $3M EBITDA at 7× moves the deal value from $10.5M to $21M. The question is whether you're confident you can execute the growth and whether the market conditions for restoration M&A will remain favorable.

Recapitalization. A "recap" involves selling a minority stake (typically 40–49%) to a financial partner while retaining majority control. This provides liquidity now while preserving your ability to capture the full value of continued growth. Recaps are underused by restoration owners as an alternative to outright sale.

Management buyout. If you have a strong management team, a management buyout — where key employees purchase the business with financing — can produce comparable liquidity while ensuring business continuity and rewarding your team.

Wait for better timing. If your financial documentation is incomplete, your EBITDA is on a strong growth trajectory, or the current offer is below market, waiting 12–24 months to build a stronger financial record and run a proper competitive process may produce a meaningfully better outcome.

Apply the Framework: Your PE Offer Worksheet

Work through these questions before responding to any offer:

Offer analysis:

What is the EBITDA being used for the valuation? ☐ Theirs / ☐ Yours / ☐ Agreed
What is the multiple? ____×
Where does this sit vs. comparable transactions? ☐ Above / ☐ At market / ☐ Below
Cash at close as % of total consideration: ____%
Earnout as % of total consideration: ____%

Structure analysis:

Can you convert any earnout to cash or seller note? ☐ Yes / ☐ No / ☐ Unknown
Is the rollover equity in a vehicle you understand? ☐ Yes / ☐ No
Have you modeled the after-tax cash at close? ☐ Yes / ☐ No

Personal readiness:

Does the after-tax cash at close meet your minimum financial need? ☐ Yes / ☐ No
Are you genuinely willing to commit to the post-sale role for the required term? ☐ Yes / ☐ No / ☐ Uncertain
Have you consulted with a tax advisor on structure? ☐ Yes / ☐ No

Alternatives:

Have you run a competitive process or received other offers? ☐ Yes / ☐ No
Have you considered a recap as an alternative? ☐ Yes / ☐ No
Do you have 2–3 years before retirement pressure? ☐ Yes / ☐ No

Decision guidance: If more than three answers in any section are "No" or "Unknown," you're not ready to decide. Get the missing information before you respond to the offer.

When the Framework Says: Run a Process First

The most common mistake is negotiating exclusively with a single buyer. A single-buyer process gives the buyer information leverage — they know you're not actively comparing alternatives, and they set the terms accordingly.

A competitive sale process — even informally approaching 3–5 potential buyers — consistently produces 15–25% better outcomes and better deal terms. The cost of running a process is the M&A advisor's success fee (typically 3–5% of deal value). The benefit is almost always larger.

What to tell the PE firm: "We're in the early stages of evaluating our strategic options and would be happy to discuss your interest as part of that process." This is true, professional, and sets the right dynamic.

When the Framework Says: Consider the Alternatives

If the offer doesn't meet the framework criteria, here's how to think about each alternative:

If your financial documentation is weak: Don't sell now. Invest 18–24 months in clean monthly closes, documented job-level P&L history, and audited or reviewed financials. The improvement in financial quality can increase your multiple by 0.5× to 1.5× — worth significantly more than the cost of getting there.

If you're on a strong growth trajectory: Model the difference between selling now vs. in 2 years at your projected EBITDA. If the math favors waiting and you have the energy and confidence to execute, waiting is often the right answer.

If you want partial liquidity without full sale: Talk to a financial advisor about recapitalization. Taking 40–49% off the table now while retaining control and continuing to build the business is an underused path.

Frequently Asked Questions

How do I know if the EBITDA number the buyer is using is correct?

Have your accountant and M&A advisor prepare your own EBITDA analysis before you engage with any buyer. This "quality of earnings" view should include: your actual EBITDA for the last 3 years, normalized for owner compensation at market rate, one-time expenses added back appropriately, and normalized for any revenue or cost items that won't continue post-close. The buyer's EBITDA calculation will differ from yours — the difference is a negotiating point.

What is a "platform" in PE restoration roll-ups?

A PE firm pursuing a restoration roll-up strategy typically acquires a larger "platform" company first, then adds smaller "add-on" acquisitions. If you're being acquired as the platform, you typically receive a higher multiple and more autonomy. If you're an add-on to an existing platform, your multiple may be lower and your post-sale role more constrained. Know which you are.

Should I hire an M&A advisor?

Yes, unless the deal is under $2M in total value. An M&A advisor who has completed restoration industry transactions will: know the current market multiples, run the competitive process, negotiate deal structure on your behalf, identify EBITDA addbacks you haven't considered, and manage the due diligence process so it doesn't consume your management bandwidth. Their fee (3–5% of deal value) is almost always earned back in improved deal terms.

What happens to my employees if I sell to PE?

This is deal-specific and depends heavily on the PE firm's platform strategy. Some firms are genuinely focused on building the business and retain all employees. Others aggressively rationalize overhead post-close. Ask explicitly about their operating philosophy and get commitments about key employees in writing if this matters to you.

How do I value the rollover equity?

The honest answer: assume your rollover equity is worth zero when modeling the downside, and worth 1.5–3× when modeling the upside. PE-backed restoration platforms can produce excellent returns on rollover equity when the platform performs — and poor returns when it doesn't. The wide range reflects the genuine uncertainty. Don't count on rollover equity for retirement planning; treat it as upside.

What does "clean books" mean in the context of a sale process?

In an acquisition context, "clean books" means: 2–3 years of monthly closes delivered within 15 days, job-level P&L documented for all major jobs, supplement recovery tracking showing collection rates, TPA program P&L clearly broken out, all owner compensation properly classified, and audited or reviewed financials for at least 1 year. The better your financial documentation, the higher your multiple and the faster your due diligence closes. This is why clean bookkeeping is the prerequisite for a premium exit.

What is a Letter of Intent (LOI) and should I sign one before getting legal advice?

No. An LOI is the document that establishes the framework of the deal before definitive agreements. Some LOI terms — particularly exclusivity periods that prevent you from talking to other buyers — have real economic consequences. Review every LOI with a transaction attorney before signing, even if most of the terms are "non-binding."