BOSTON — Residential HVAC M&A activity remains strong as private equity firms continue to acquire home services businesses, according to Capstone Partners’ October 2026 Residential Services M&A Update.

HVAC, plumbing, and electrical businesses accounted for 19.3% of residential services mergers and acquisitions (M&A) activity year-to-date through July 27, 2026. The segment ranked second behind landscaping and lawn care, which accounted for the largest share of transactions.

Capstone reported 223 residential services transactions announced or completed year to date. That compares with 257 transactions during the same period in 2025, indicating a modest slowdown in deal activity. However, competition for established businesses remains strong.

Private equity firms accounted for 60.5% of residential services M&A activity in 2026. Within the HVAC, plumbing, and electrical segment, private equity-backed buyers completed 27 of 43 transactions, representing 62.8% of segment deal volume.

The report identifies recurring customer relationships, membership-based service models, and essential service demand as factors supporting investor interest in HVAC businesses. Buyers also favor companies with recurring revenue, dense service routes, stable labor, and modern back-office systems.

Wrench Group, backed by Leonard Green, remained among the segment’s most active private equity platforms, expanding through acquisitions of established local operators across multiple regions.

However, qualified labor remains a significant constraint on growth across residential services. According to Capstone, HVAC technician supply met 63.8% of demand in 2024. The report projects that figure will decline to 62.9% by 2029, citing the TechForce Foundation’s 2026 Supply, Demand & Opportunity report.

Labor shortages can increase wage and retention costs, delay service, and limit a contractor’s ability to take on additional work. Capstone’s Residential Services index showed average gross margins declining from 57.5% in the first quarter of 2017 to 48.8% in the first quarter of 2026.

These workforce challenges are also influencing acquisition decisions. Buyers increasingly assess whether businesses have established systems for recruiting, training, and retaining technicians. They also evaluate whether customer relationships depend heavily on the owner or are embedded within the broader organization.

“Customer demand is not the limiting factor to growth — qualified labor is,” said Phil Krieger, managing director at Capstone Partners and lead contributor to the report. He added that buyers increasingly value the systems, culture, and infrastructure needed to develop and retain technicians at scale.

For HVAC contractors, the findings highlight the importance of workforce development and repeatable operating processes alongside revenue growth. Businesses that build technician training and retention programs, establish recurring service relationships, and strengthen internal systems may be better positioned to support expansion or navigate a future sale.

Capstone expects labor challenges and consolidation activity to remain important factors in the residential services market through 2026 and 2027.

View the full report: Capstone Partners’ Residential Services M&A Update – October 2026.