Peter Ciaverilla·January 9, 2025

Bullseye Buying a $1m SDE Business in a Hot Industry | Peter Ciaverilla Interview

Peter Ciaverilla is a former KPMG management consultant and database programmer who left his job in May 2021 to do a self-funded search, moved his family into his parents' home in Rockford, Michigan to cut costs, and acquired Sharon's Heating and Air Conditioning — a Metro Detroit HVAC contractor founded in 1981 — through proprietary cold email outreach. The deal was off-market: Sharon, the founder, had not listed with a broker but was fielding inbound interest; Pete's $4.3m purchase (roughly 4x EBITDA on ~$1.1m SDE and ~$11.5m revenue) was structured with 85% SBA 7(a) financing through Live Oak Bank, a 10% seller note, a 5% seller standby note, and roughly $250k in outside equity, leaving Pete with 91.26% ownership at close. The primary strategic move post-acquisition has been shifting the revenue mix from 50/50 residential/commercial construction toward 65/35 residential, capitalizing on much higher residential margins while retaining commercial work for its seasonality-smoothing benefit — EBITDA has grown from ~$1.06m to ~$1.6-1.7m over three years on flat revenues. Key challenges include the highly leveraged capital structure that stressed cash flow in year one, inability to meet key employees before close due to the seller's confidentiality demands, and a persistent HVAC labor shortage that limits growth. Pete receives frequent private equity acquisition inquiries but has no concrete exit timeline, noting the commercial revenue mix may reduce valuation to PE buyers.

Deal facts

purchase price: $4.3m
multiple: ~4x EBITDA
sde ebitda: EBITDA $1.06m at acquisition; SDE ~$1.1m
revenue: ~$11.5m
financing structure: 85% SBA 7(a) loan (Live Oak Bank) + 10% seller note + 5% seller standby note + ~5% cash equity from investors/self
notes: Purchase was off-market via proprietary cold email outreach. Seller (Sharon, the founder) had not engaged a broker. Buyer raised ~$215-260k in equity; personally contributed less than 10% of the equity raise. Buyer owns 91.26% post-close. EBITDA grown to ~$1.6-1.7m by ~year 3. Revenue mix shifted from 50/50 residential/commercial to ~65/35 residential/commercial.

Why this business

Pete was not specifically targeting HVAC — he was industry-agnostic and geographically restricted to Michigan. He was drawn to HVAC through family familiarity (neighbors and acquaintances in the trade) and a story about a PE professional who left to buy a small HVAC company. Sharon's Heating and Air Conditioning came up through his proprietary cold email campaign and fit his criteria: an old-world, asset-light, simple-to-understand business with enough scale that he wouldn't need deep industry knowledge to run it, and with a strong existing management structure.

What's working

Shifting revenue mix from 50/50 residential/commercial toward 65/35 has grown EBITDA from ~$1.06m to ~$1.6-1.7m over three years with flat top-line revenue, because residential carries significantly higher margins
Commercial construction revenue smooths residential seasonality — in year 2, a mild winter and summer caused residential revenue to drop 26% but commercial rose 26%, allowing the company to grow 11% overall
Commercial projects are converted into recurring maintenance contracts post-completion (e.g., apartment buildings), adding recurring revenue to what is otherwise project-based work
Seller's son stayed on for ~18 months post-close, providing operational continuity and helping smooth the management transition
Scale of ~65 employees and existing middle management structure allowed Pete to operate as a CEO rather than be pulled into day-to-day technical work
HVAC industry is attracting heavy private equity interest, providing a favorable exit environment and frequent inbound interest

What's hard

Seller required secrecy from employees until close, preventing Pete from vetting key managers pre-acquisition — a major risk that caused some investors to pass on the deal
Highly leveraged structure (85% SBA) created cash flow pressure, especially in the first 18 months; Pete had to draw on a line of credit a couple of times for payroll and working capital
Labor shortage in skilled trades: finding and retaining HVAC technicians is the primary constraint on growth — 'it's the difficulty in finding really good technicians and retaining them'
Commercial construction has retainage (10% of project revenue held until completion), creating cash flow timing gaps of 12-14 months before full profit is realized
Fundraising for the equity raise was done last-minute after going under LOI, rather than proactively building investor relationships during the search — made the process harder
The commercial revenue mix, while operationally valuable, is a negative in the eyes of PE buyers who prefer pure residential — potentially penalizing valuation at exit
Stressful day-to-day: 'death by a thousand cuts' — personnel issues, customer complaints, supplier problems, cash flow timing all compound weekly

Notable quotes

I really only regret from my search was not spinning up and diving into my proprietary search immediately because I felt like all the best leads I had for the most part was through proprietary search.

Had I been given the opportunity now to invest in my own deal I probably would not have invested in it for this very reason — you're essentially ripping off the bandaid on day one you don't know how the company's going to react.

I'm the last person in the world you probably want repairing your furnace, even though I own an HVAC company.

It's exceedingly difficult and I have had fetal position moments and there's been plenty of times where I've said I probably made a huge mistake or I regret this or this is not what it's cracked up to be.