Originally published as a featured column in the May/June 2025 Issue of Indoor Comfort Marketing.
At the risk of dating myself, I often recall the absurd early 1980s movie Time Bandits when a unique business opportunity presents itself. The movie featured a ragtag group of thieves who used a magical map to locate time portals so they could plunder across different eras of history. The characters literally jump through a temporary window in time to take advantage of opportunities they normally would not have had.
While most of us are more serious than the legendary Monty Python alumni behind the film, the idea of being ready to leap with conviction at a sudden opportunity resonates with business owners and entrepreneurs. Many small business leaders are adept at recognizing the rare opportunity when it presents itself, but they operate with limited experience to follow through. As a result, the golden acquisition opportunity can look and feel like a daunting and unfamiliar mountain to climb. But with the right map, 2025 could be the year you finally navigate the maze of an acquisition and position yourself to compete for the opportunities in a rapidly consolidating industry.
The Deal Environment is Improving for Everyone
After some notable weakness in merger and acquisition activity starting in early 2023 across the entire lower middle market for all kinds of businesses, the conditions are taking shape for a busy year. The propane, heating oil and HVAC industries are no exception. While we witnessed a noticeable slow-down in fuel deal activity by large strategic acquirers in 2024, we expect a return to dealmaking by multi-state players and private equity firms in 2025 and 2026. Despite a forecasted resumption in activity by these larger players, this year is also shaping up to be the ideal time for many smaller, local players to complete a successful acquisition.
Economic turbulence from the unknown long-term impact of newly imposed tariffs is being balanced out by a friendlier regulatory environment, stabilized interest rates and the continued availability of capital. Enterprise valuations for businesses have ticked downward, and muted M&A activity has pushed many lenders to pursue fewer available deals more aggressively. Multiple financial firms report that both traditional and non-bank lenders are responding to the greater competition for deals by permitting slightly higher leverage (measured as Debt/EBITDA) to get deals done in 2025.
Know Where to Start, Know What to Look For, Know Who to Work With
While sellers frequently engage a business broker or investment bank to run their sale process, buyers often choose to go it alone when evaluating transactions, setting values, structuring financing and undertaking due diligence. This can pose a challenge for small business owners who simply don’t have a dedicated and experienced in-house team to effectively pull this off. While most buyers can lean on their industry background to navigate through the operational strengths and weaknesses of an acquisition target during initial due diligence, the importance of value determination, debt and equity requirements, deal structuring and banking metrics are just as critical to winning and closing a transaction. Business owners in our industry – by and large – are not experienced with these aspects of an acquisition.
Additionally, propane and HVAC transactions often require a sizable amount of cash at close based on the competitive environment for these assets, adding more complexity in arranging financing with banking and other capital providers. And market value and deal structures tend to change over time based on a variety of competitive and financial factors. The acceptability of earnouts and seller notes fluctuate over time while equity requirements rise and fall based on the credit markets.
There are other pitfalls to deals that center around the initial offer or letter of intent stage. A seller’s concern about the buyer’s financing sources, an unrealistic valuation, discomfort with a potential buyer’s perceived ability to close the deal, or an unacceptable deal structure can all torpedo an acquisition. Fortunately, many of these pitfalls can be avoided by assembling the right team of experienced financial, accounting and legal advisors ahead of time.
Lastly, different sized transactions often require different sources of capital. While a small acquisition may be achieved with a combination of cash and a seller note, larger deals often require both debt and equity support. To many in our industry, rapidly expanding alternative capital sources such as private equity, Small Business Investment Company funds (SBICs) and private family offices are relatively novel avenues of funding. However, working with a private investment firm or non-bank lender could open the door to tremendous opportunities to fight above your weight class, grow your business materially and benefit from tax advantages.
Don’t be Afraid to Leap
If you’ve been hesitant to “take the plunge” in the past, you can get off the starting block this year with some pre-planning, the right support and an understanding of the capital tools available. Structured correctly, your advisory team will give you the confidence – or just the extra push – to make 2025 the year you take advantage of the opportunities you’ve been able to identify. And you don’t need a Time Bandits-style magic map to leap through the window of opportunity when it pops open. Even inexperienced acquirers with a bit of preparation and a willingness to explore both traditional and non-traditional financing sources can seize the opportunity and reach the closing table.
Jeff Simpson is the founder and managing member of Notch Capital, a private investment firm specializing in buyouts and recapitalizations of lower middle market businesses in the heating, cooling and home services industries. Notch Capital also provides advisory services to help these businesses strengthen their performance and analyze acquisitions.