Posted: May 7, 2026

Think You’re Ready for an Acquisition? Keep These Financial Factors in Mind

Originally published as a featured column in the May/June 2026 Issue of Indoor Comfort Marketing.

As the dust settles following a challenging winter for fuel service providers in many parts of the country, the industry once again moves into the so-called offseason. Time will tell if a broader industry financial boon emerges from this stretch of uncharacteristically high demand for fuel and equipment service work. Strong-performing companies will choose between finally cashing out or leveraging their financial positions to drive continued growth – be it organically or through acquisition. Regardless of which path you choose, the best in class companies will treat this summer less like an opportunity to take it easy for a few months and more like a chance to push aggressively toward your desired outcome.

If you’re a business owner ready to pursue an acquisition, get ready to enter the “Thunderdome”. Today’s competitive landscape for quality businesses is as strong as it has been in years. Financial buyers are increasingly targeting the lower middle market, multi-state strategic acquirers are more active and the stable, recurring cash flow profile common in the fuel and home service businesses continues to attract interest. The result is an environment where buyers must be aggressive, disciplined and financially prepared to win.

Buyer success in 2026 will not be an accident. If growth through acquisition is on your to-do list, a robust financial plan can help you position your company as a credible and attractive partner to both sellers and capital partners. While experienced operators often excel at evaluating geographic fit, customer relationships, service offerings and personnel, the financial evaluation of a deal can present new challenges. To this end, here are several recommendations for would-be buyers to help guide you as you analyze potential opportunities.

Understand the Current Valuation Environment
One of the most common frustrations for buyers is failing to move past the initial bid because their offer does not attract seller interest. In many cases, the issue is not intent but misalignment with market valuation or deal structure.

Recognize that valuations and deal structures (i.e., the mix of cash, seller notes, equity rolls and earnouts) are not static – they are influenced by competition, cost of capital and the types of buyers pursuing the opportunity. Engaging an industry-focused financial advisor or accountant early in the process can help buyers better understand current market expectations and avoid submitting an offer that never reaches serious discussion. Presenting a credible and market-aligned offer is essential to getting a seat at the table.

Financial Reporting Must Inspire Confidence
Most acquisitions require lender or investor support, making strong financial reporting essential. Buyers should be prepared to present timely financial statements, clean tax returns and current interim reporting to demonstrate operational and financial discipline. The quality of reporting can either lead to a smooth approval process or raise unwanted – and unnecessary – red flags that slow down the process. If the buyer’s financials are delayed, capital partners are likely to infer future reporting will be delayed as well.

Carefully Evaluate Seller Add-Backs
It is common in an acquisition transaction to present future projected cash flows which give credit for non-recurring or discretionary expenses such as owner compensation, benefits, rent or one-time charges. While these adjustments are common, buyers must carefully validate them before presenting projections to capital partners. Large or unusual add-backs that materially drive valuation can raise skepticism with banks and other capital providers. Similarly, if the departing owner performed critical operational functions or expenses were deferred in recent years, earnings should be adjusted to reflect the true ongoing cost structure.

Be Realistic About Capital Expenditures
The Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) alone rarely tells the full story in fuel and home service businesses and should not be taken at face value. Many businesses require significant continuing outlays of cash to sustain the business (“maintenance capex”) and support continued growth of the business (“growth capex”). Ongoing payments for vehicles, equipment, tanks and technology can significantly impact available cash flow. Determine your true free cash flow after this impact to prevent against overestimating the company’s ability to service debt.

Plan for Increased Working Capital Needs
Working capital demands often increase after an acquisition. Businesses that extend payment terms to customers or outlay large amounts of cash over a short, seasonal period typically rely on bank lines of credit to maintain liquidity. Acquiring a company with a similar profile will increase this impact and should be fully understood when approaching financing partners. Advisors can assist you in forecasting the impact on working capital needs for the combined operation. Differences in customer payment patterns, service contracts and other recurring fee sources should be examined to avoid unexpected liquidity pressure.

If Seeking an Equity Partner, Present a Clear Plan
Companies with EBITDA over $3 million may be able to attract an equity partner to support acquisitions. In these situations, a clear and actionable growth strategy is critical. Equity partners want to see a roadmap for value creation, including potential add-on acquisitions, geographic expansion opportunities, cross-selling initiatives and operational efficiencies. A detailed budget, supported by realistic assumptions and clearly identified financial upside will be required in this situation to attract investment.

As acquisition opportunities are expected to emerge this year, the most successful buyers will be those who combine their operational expertise with financial discipline during the process. Preparedness will make the difference between gaining traction with both the seller and the financing partner or watching an opportunity go to a better-prepared buyer.

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.