Inside the Sale: A Former HOA Management Owner Shares What It Really Takes

The world of HOA/condo management may seem niche, but it’s attracting more attention than ever from investors. To understand what it takes to successfully grow and sell a management company, we spoke with Mike Egelston, former co-owner of Cities Management, who sold his company several years ago. From operational insights to valuation strategies and lessons for today’s sellers, Mike shares an in-depth look at navigating the complex landscape of management company exits.

From Startup to Successful Exit

Mike’s journey with Cities Management began in 2000, when he joined his business partner’s firm after selling his own commercial printing business.

“I wasn’t ready to retire,” Mike recalls. “My business partner asked me to come on board and help. Initially, I focused on building our online operating system. But soon, it became clear that Cities needed stronger infrastructure and profitability before we could fund that.”

When Mike took over, Cities Management was modestly profitable at best. By the time the company was sold, net margins had grown to an impressive 25%+, a strong figure in an industry often characterized at the time by thin margins and labor-intensive operations.

The Road to Acquisition

One specific large strategic buyer had been interested in Cities for years. Multiple attempts were made to acquire the company, but timing stalled the process. Other buyers also expressed interest, but at multiples that were not appealing.

“A strategic buyer came to us , but several issues postponed the deal,” Mike says. “A couple of years later, they came back. This time, I made it very clear: ‘Here are the numbers. If you can’t meet this, we can’t make a deal.’ They agreed, and we moved forward.”

The target multiple was higher than the then-industry norm of three to six times EBITDA. “The buyers really wanted us,” Mike explains. “It was ambitious, but fair. Once they agreed, we knew it was the right time.”

Preparing for a Sale

Mike emphasizes the importance of preparation: “I always ran Cities as if we could sell tomorrow. Contracts, financials, everything was organized. That made diligence smooth and helped us achieve a strong valuation.”

Unlike many management companies, which often lack structured financial reporting, Cities was ready. Mike advises other owners: “Keep clean books, understand your add-backs, and operate professionally. If you treat the business as a personal piggy bank, it will complicate the sale.”

During diligence, the buyers requested comprehensive information, from contracts to office equipment. Mike notes that preparation paid off: “The process went well because we had our numbers in hand, unlike many other management companies.”

Legal and Transactional Advice

Interestingly, Mike handled most negotiations himself. “Sell-side brokers in the HOA space weren’t really a thing back then,” he says. “We relied on our HOA attorney for contract review and our accountant for tax implications.”

The deal was structured as an asset purchase, giving the buyers certain depreciation benefits. “We looked at the numbers and decided the depreciation wasn’t significant enough to worry about,” Mike recalls.

Post-Close Considerations

Post-sale, Mike stayed on with a five-year employment contract. He continued to manage a separate company and had the flexibility to attend conferences when needed. The deal also included a one-year EBITDA lookback, ensuring alignment and accountability: “It’s a fair system. If you work hard and grow the business, there’s upside. If you coast, you make what you got.”

When asked about legacy, Mike is candid: “Once you cash the check, it’s [the buyer’s] company. I cared deeply about my employees, but you have to recognize that people will leave if a better opportunity comes along.” The sale was communicated subtly to clients: Cities Management retained its name, and only a small tagline noted it was now part of a larger brand.

Lessons for Today’s Sellers

Mike has clear advice for modern HOA management company owners considering an exit:

• Prioritize strong counsel. Hire a skilled attorney and, if needed, a broker familiar with the industry.
• Focus on financial outcomes, not legacy. “Don’t obsess over legacy. Focus on the deal’s value,” Mike says.
• Stay realistic. Many owners overestimate their company’s worth based on personal needs rather than market reality.
• Maintain healthy paranoia. Competitors, clients, and employees can change quickly.
• Keep meticulous records. Run the business as though it could be sold tomorrow.
  

Mike adds: “Many owners grow their businesses by happenstance. They aren’t always aware of the operational or financial structures needed to maximize value. That’s where preparation and guidance matter most.”

The Changing Landscape

If Cities Management were selling today, Mike believes the outcome would be different: higher multiples, more buyers, and a more competitive market. “Given the number of private equity firms looking for management companies, I might hire a broker to bring multiple offers to the table,” he says.

Final Thoughts

Mike’s journey with Cities Management illustrates the complexity and opportunity in the HOA management sector. From operational excellence and careful financial management to strategic negotiation and post-sale planning, his insights provide a blueprint for business owners navigating similar paths.

As Mike sums up: “Run your business as if it could sell tomorrow. Keep your numbers clean, understand the market, and don’t overvalue legacy. Focus on what really matters, the outcome for you, your business, and the people who depend on it.”

For HOA management owners considering an exit, these lessons are as relevant today as they were when Cities Management found the right partner.