When part of a sale price depends on gross margin after completion, the businesses that can see their margin month by month are the ones that get paid in full.
Many owners know turnover to the pound but only learn their gross margin when the accounts arrive. Day to day, that gap rarely causes trouble. It matters a great deal when a buyer makes part of the price conditional on margin, as a deal announced this week shows.
Today’s News: What the EARNZ announcement said
On 30 September 2026, AIM-listed EARNZ plc published a regulatory announcement setting out a conditional agreement to acquire Gem New Co, a company formed to receive certain assets of the GEM business. GEM is a central London contractor whose core activities are heat metering, mechanical, electrical, gas and renewable installations, maintenance and remedial works, and compliance software.
The initial consideration is £10m: £4m in cash, £2m in loan notes and £4m in new EARNZ shares. A further sum of up to £13.55m is deferred over two years, taking the maximum consideration to £23.55m. So less than half of the maximum price is paid at completion, and only part of that in cash.
The deferred payments are conditional. The seller receives them only if Gem New Co achieves, in either year, both a specified level of revenue and an average gross margin of at least 22%.
The announcement reports normalised EBITDA of £3.2m for Gem New Co in the year to 30 June 2026. To fund the deal, EARNZ is raising approximately £4.1m through a share placing and has agreed a revolving credit facility of up to £5m with HSBC UK. The acquisition is conditional on shareholder approval at a general meeting on 19 October 2026.
Why it matters for how the business runs
The headline figure in a sale and the amount actually received can be very different. A guide to what an HVAC business is worth starts with earnings, but the terms attached to those earnings shape the outcome just as much.
Those terms put weight on things a buyer cannot take on trust: how margin is measured, how consistently work is priced, and whether results rely on the owner’s personal involvement. These are the same points covered in what actually makes an HVAC business sellable.
Acquirers are looking at heat pump, HVAC, Electrical Contracting and retrofit firms because funding and building regulations are moving more heating work towards electrification. Owners who are years away from selling still benefit from running the business as if the question could be asked tomorrow.
What to ask about your own business
- Is gross margin visible monthly? If margin by type of work is only known after the accounts are prepared, a margin-linked payment becomes a risk instead of an opportunity.
- Would performance hold without the owner? Deferred payments are earned after the sale, often when the owner’s role has changed. Results need to come from how the business is organised.
- Could the numbers survive scrutiny? Buyers test management information closely during operational due diligence. Clean, consistent records shorten that process and support the price.
Sources
- EARNZ plc (RNS, via Investegate): Proposed Acquisition, Placing, CLN, RCF & GM