Can HOA Management Valuations Actually Decline?

Owners periodically ask whether purchase multiples in community association management can decline. It is a reasonable question. The industry has experienced sustained acquisition activity over the past several years. New capital has entered the space, platform valuations have expanded, and consolidation has accelerated across multiple regions.

The presence of activity, however, does not eliminate cyclicality. No segment of business services is immune from broader capital market dynamics. The more useful inquiry is not whether valuations can decline, but what conditions would cause them to do so.

Industry Tailwinds Supporting Current Valuations

There are understandable structural tailwinds behind transaction activity in community association management. A high proportion of new housing inventory exists within HOA-governed communities. Revenue is recurring. Ancillary income streams provide incremental margin opportunities. The industry remains fragmented, allowing scaled operators to pursue tuck-in acquisitions at lower multiples and integrate those businesses into broader infrastructure.

These characteristics have attracted long-term capital and supported valuation expansion. Durable revenue and visible consolidation opportunity are attractive traits in any business services segment.

The Role of Private Equity Fundraising

Private equity capital raised today becomes acquisition capital years later. Fundraising activity has slowed meaningfully in recent years.

The relationship between fundraising and valuation is not abstract. When more capital is raised, more capital must be deployed. That capital competes for a finite pool of assets. Increased competition for those assets often results in higher purchase prices. The dynamic is not dissimilar to inflation. When more money chases the same supply of goods, prices rise.

Conversely, when fundraising slows materially and remains depressed over time, future acquisition capital declines. The impact is not immediate. Funds raised in prior vintages continue to deploy. However, if lower capital formation persists, the effect on dry powder and new platform formation may not be felt for several years. M&A cycles often turn with a lag.

Valuation environments are shaped not only by industry fundamentals, but by the amount of capital available to transact.

Private Credit and Financing Availability

Buyout transactions depend heavily on available leverage. If private credit markets contract materially, whether through liquidity events, regulatory shifts, or credit losses, acquisition financing becomes more constrained for most private equity investors. Reduced leverage capacity frequently translates into lower purchase prices, even in fundamentally sound industries. Recent worries, led by concern over outstanding loans to software companies, have investors focusing on valuations underpinning private credit investments.

Industries do not reprice solely because they become less attractive. They reprice when capital becomes more expensive or less available. Leverage is an integral component of underwriting models. When leverage assumptions change, valuation frameworks adjust.

Consolidation and the Maturation of Fragmented Industries

Perhaps the most structurally relevant variable for community association management is consolidation itself.

Current underwriting frameworks often assume continued availability of smaller, sub-scale acquisition targets at lower multiples. Those assumptions support platform economics. Buyers model the ability to acquire businesses below the valuation level at which the consolidated platform may ultimately trade.

If fragmentation meaningfully declines over time and the pool of attractively priced tuck-in opportunities shrinks, underwriting math changes. The arbitrage between acquisition multiples and platform valuation narrows. When that spread compresses, buyers become more disciplined.

Industries often command peak multiples when fragmentation is high and consolidation opportunity is visible. As consolidation matures and arbitrage opportunities narrow, valuation expansion tends to moderate. The durability of recurring revenue does not disappear, but the growth thesis evolves.

The Influence of Public Market Benchmarks

There are no publicly traded pure-play HOA management or accounting companies. However, public bellwethers in adjacent property and facilities services sectors influence private market underwriting.

Buyers frequently assume that scaled, consolidated platforms may eventually be sold to, merged with, or benchmarked against larger publicly traded operators that command premium EBITDA multiples. That expectation provides a valuation buffer. Smaller acquisitions can be underwritten with the assumption that the consolidated platform may ultimately be valued at or near public company multiples.

If publicly traded comparables were to experience sustained multiple compression, that buffer narrows. A decline in public company EBITDA multiples reduces the gap between what private buyers pay for smaller businesses and the valuation levels assumed at exit. When that gap compresses, underwriting models adjust.

Even in industries without a direct public pure play, public company valuation levels influence private transaction math. A meaningful decline in those benchmarks would reverberate through acquisition pricing.

A Capital Cycle Illustration

The chart above reflects EBITDA multiple expansion and subsequent moderation within another fragmented industry.

Multiples in that sector expanded meaningfully from 2019 through the 2021–2022 peak before moderating in subsequent years. We can provide additional context on the underlying industry dynamics upon request. The purpose of this illustration is not to suggest that community association management will follow an identical trajectory. It is to demonstrate that valuation expansion rarely proceeds in a straight line.

Can HOA Management Valuations Fall?

Yes. The more relevant consideration is what would drive such a decline.

Structural industry durability provides support. Recurring revenue, demographic tailwinds, and operational stability matter. But capital formation, financing availability, public market benchmarks, and consolidation maturity ultimately influence valuation environments.

Understanding those forces does not imply urgency. It does underscore that valuation cycles are shaped by broader market dynamics, not solely by individual company performance. Owners evaluating long-term optionality benefit from understanding both operational fundamentals and capital market context.

If you would like to discuss how these dynamics apply to your specific circumstances, we are available.