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The Solar Coaster

The solar industry historically has been a roller coaster of boom-and-bust cycles. The last few years have been a prime example of this.  

Source: SEIA/Wood Mackenzie Solar Market Insight Report Q4 2023

As a result of the boom years from 2019 – 2021, solar installation contractors across the United States experienced rapid growth. Public solar installation stocks soared during this time, fueled by low interest rates and rapidly expanding top-line revenues. Public solar installers were on an acquisition spree, paying for their targets with their own appreciated stock. This in turn fueled an increase in middle-market private company valuation multiples.

The spike in interest rates in 2022 rapidly lowered demand for solar installation while raising the cost of capital for public solar installers. Most solar installer stocks sank by more than 80% from 2022 to early 2024. This in turn caused lower middle market valuations to slide back down to earth throughout 2022 and 2023, bringing those multiples back in line with other specialty construction contractors. 

Current Market Prices

There is good current market demand from strategic and financial buyers for well-run solar installation companies. Based on our current experiences in the market (we sold a solar installation contractor in April 2024), here are general price multiple ranges that we found for lower-middle market solar installers. 

  • $3M – $10M in Adjusted EBITDA: 4x to 7.5x
  • $1M – $3M in Adjusted EBITDA: 3.5x to 6x
  • $500k – $1M in Adjusted EBITDA: 2x to 4x

These multiples are similar to other specialty construction contractors (HVAC, plumbing, electrical contractors) and will most likely stay where they are currently. To be on the upper end of these ranges, it helps if sellers are approaching 10% margins for Adjusted EBITDA. 

About ACT Capital Advisors
ACT Capital Advisors is a premier mergers & and acquisitions firm representing lower-middle-market companies across all industries. ACT has a 37-year history of deal-making, closing 250+ transactions, and unlocking over $1.5 billion in wealth for its clients. For more information, visit https://actcapitaladvisors.com.

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