Multiple Arbitrage Calculator
See exactly how PE firms create value in home services. Buy a platform at 7x, bolt on smaller companies at 4x, improve operations, and exit at 10x. This is the math behind the biggest wealth creation strategy in the trades.
🏢 Platform Acquisition
The anchor business PE firms buy first. Usually the largest, best-run company in the market.
🔗 Bolt-On Acquisitions
Smaller businesses acquired at lower multiples and folded into the platform.
⚙️ Operational Improvements
Post-acquisition improvements from better systems, pricing, and route density.
🚪 Exit Strategy
Multiple Arbitrage Returns
$0
total value created
Value Creation Breakdown
Roll-Up Visualization
Platform
+ Bolt-Ons
+ Improvements
= Exit Value
Enter your platform and bolt-on details to see how multiple arbitrage creates value. The gap between buying at low multiples and selling at higher multiples is the core PE strategy in home services.
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How Multiple Arbitrage Works in Home Services
Multiple arbitrage is the core wealth creation strategy in private equity. The concept is simple: buy a business at a low valuation multiple, make it larger and more stable, then sell it at a higher multiple. The difference between the entry and exit multiples, multiplied by the EBITDA, is the arbitrage gain. In home services, PE firms typically buy platforms at 6x to 8x and bolt-on smaller companies at 3x to 4x. The combined entity exits at 8x to 12x.
The math works because larger businesses get higher multiples. A $500K EBITDA plumbing company with one location and an owner-operator sells at 3.5x. That same $500K in EBITDA, when folded into a $5M EBITDA platform with 8 locations and professional management, exits at 10x. Nothing about the underlying business changed. The multiple expanded because the risk profile improved.
This calculator lets you model the full roll-up process: platform acquisition, bolt-on acquisitions, operational improvements, and exit. Adjust the entry and exit multiples, the number of bolt-ons, and the margin improvements to see how each lever affects total returns. The PE firms running these strategies in HVAC, plumbing, and pest control are generating 2.5x to 4x MOIC returns. The math is not complicated. It just requires understanding how multiples work.
The Roll-Up Playbook
The typical PE roll-up follows a predictable pattern. Step one: acquire a well-run platform company at a reasonable multiple (6x to 8x). Step two: use the platform's infrastructure (back office, management, brand) to acquire smaller bolt-on companies at lower multiples (3x to 4x). Step three: integrate the bolt-ons, standardize operations, improve margins, and grow revenue. Step four: exit the combined entity at a premium multiple (8x to 12x) because it is now larger, more stable, and more attractive to the next buyer.
Value Creation Breakdown
PE returns in home services come from two sources. The first is arbitrage: buying at low multiples and selling at higher ones. If you buy at a blended 5x and exit at 10x, the multiple expansion alone doubles your money. The second is operational improvement: better pricing, route optimization, lower overhead, and revenue growth. Most home services roll-ups generate 60% to 70% of returns from arbitrage and 30% to 40% from operations. This calculator shows you both.
Home Services PE Activity
- Wrench Group (HVAC): sold at 12x to 14x EBITDA
- Sila Services (multi-trade): valued at ~$1.5B at ~15x EBITDA
- Champions Group: $2.5B deal with Blackstone
- Rollins and Anticimex dominate pest control roll-ups
- 76% of home service businesses are still independently owned
- $700B+ total addressable market in home services
- 300,000+ small trade businesses across the US
Frequently Asked Questions
What is multiple arbitrage?
Multiple arbitrage is the strategy of buying a business at one valuation multiple and selling it at a higher one. A PE firm buys a $1M EBITDA business at 4x ($4M) and sells it at 8x ($8M), creating $4M in value without changing the underlying business. In practice, PE firms also improve operations, but the multiple expansion alone often generates the majority of returns.
How does a roll-up work in home services?
A PE firm acquires a well-run platform company at 6x to 8x EBITDA, then acquires smaller bolt-on businesses at 3x to 4x. The bolt-ons are integrated into the platform, sharing its management, systems, and brand. The combined entity, now larger and more diversified, commands a higher exit multiple. Each bolt-on purchased at 4x and exited at 10x creates immediate value through the multiple spread alone.
What is MOIC and why does it matter?
MOIC (Multiple on Invested Capital) measures total return relative to total investment. A 3x MOIC means you tripled your money. PE firms target 2.5x to 3.5x MOIC over a 5-year hold. MOIC below 2x is considered underperforming. Unlike IRR, MOIC is not affected by timing. It tells you the absolute return on every dollar invested.
What is a good IRR for a PE deal?
PE firms target 20% to 30% annualized IRR on home services investments. A deal with a 3x MOIC over 5 years delivers about 24.6% IRR. The IRR accounts for the time value of money. A 3x MOIC in 3 years (44% IRR) is much better than 3x in 7 years (17% IRR). Faster exits with the same MOIC produce higher IRR.
Why do larger companies get higher multiples?
Scale reduces risk. A $5M EBITDA company with 15,000 customers, 8 locations, and a management team is more stable than a $500K EBITDA company with 800 customers and an owner who does everything. Buyers pay more for stability, diversification, and professional management. The market assigns higher multiples to lower-risk businesses. This is why rolling up small businesses into larger platforms creates value.
Can small contractors benefit from understanding multiple arbitrage?
Yes. Even if you never sell to PE, understanding the valuation framework helps you build a more valuable business. The same things that PE firms pay premiums for, management teams, documented processes, recurring revenue, low owner dependency, also make your business more profitable and easier to run. Building PE-ready infrastructure is good business strategy regardless of your exit plans.
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