Filing Flows › Watsco (WSO) › Takeover & LBO
Is Watsco (WSO) a takeover target?
A leveraged buyout at today's price plus 30% ($394.19 a share) would return a loss of about 2% a year to a private-equity buyer over 5 years; the most a buyer could pay for a 20% return is $202.65 a share (−33% against today's $303.22). Historically 1.5% of companies with its figures were bought within a year (0.31× the average).
The buyout, step by step
| Entry | Amount | How |
|---|---|---|
| Offer price a share | $394.19 | today's $303.22 plus 30% |
| × shares | 38.6 million | |
| = Equity value | $15.2B | |
| + Debt refinanced | $493M | |
| − Cash | $649M | |
| + Other claims | $506M | preferred stock, minority interests |
| = Enterprise value | $15.5B | 21.6× EBITDA of $720M |
| Fees | $311M | 2% of the price |
| New debt | $4.0B | 5.5× EBITDA at 7.65% a year; the limit that binds: 5.5× EBITDA |
| Buyer's own money | $11.9B | 75% of the cost |
5 years under the buyer
| Year | Revenue | EBITDA | Interest | Free cash flow | Debt left |
|---|---|---|---|---|---|
| Year 1 | $7.5B | $723M | $303M | $304M | $3.7B |
| Year 2 | $7.5B | $730M | $280M | $323M | $3.3B |
| Year 3 | $7.7B | $742M | $255M | $346M | $3.0B |
| Year 4 | $7.8B | $759M | $229M | $375M | $2.6B |
| Year 5 | $8.1B | $782M | $200M | $410M | $2.2B |
The exit and the buyer's return
| Exit | Amount | |
|---|---|---|
| Exit multiple | 16.7× EBITDA | today's trading multiple, before any premium |
| Enterprise value at exit | $13.1B | |
| − Debt left | $2.2B | |
| = Buyer's equity | $10.9B | |
| Money multiple | 0.91× | on $11.9B put in |
| Buyer's yearly return (IRR) | −1.8% |
Price against return
What the buyer makes at other premiums over today's $303.22; the IRR reaches 20% at $202.65 a share.
| Premium | Price a share | Buyer's IRR |
|---|---|---|
| 10% | $333.54 | 2.7% |
| 20% | $363.86 | 0.3% |
| 30% | $394.19 | −1.8% |
| 40% | $424.51 | −3.7% |
| 50% | $454.83 | −5.3% |
The figures used
| Figure | Amount | |
|---|---|---|
| Revenue, last 12 months | $7.4B | |
| EBITDA, last 12 months | $720M | 9.7% of revenue |
| Depreciation and amortization | $45.0M | |
| Capital spending | $37.0M | |
| Debt | $493M | |
| Cash | $649M | |
| Share price | $303.22 | on Nov 6, 2026 |
Fixed rules, the same as the interactive view's starting point: the shares are bought at today's price plus 30%, the company's debt is refinanced and fees take 2%. New debt is the least of 5.5× EBITDA, 65% of the price and the amount whose interest EBITDA covers 2 times, at 7.65% a year (SOFR 3.89% plus the high-yield B spread 3.26% plus 0.5%, rates of Oct 15, 2026). Revenue grows 0.3% in the first year — the company's own rate, held between −3% and +8% — fading to 3% by year 5; the EBITDA margin, depreciation and capital spending stay at today's share of revenue; working capital takes 10% of each year's added revenue; tax is 20% of profit after interest. Every dollar of free cash flow repays debt. After 5 years the buyer sells at today's multiple of EBITDA.
What a takeover could cost
Takeovers in its sector paid a median premium of 40% over the share price before the deal (the middle half 14.7% to 60.2%), according to the 20 merger proxies and tender-offer responses on EDGAR that state a premium. At the median, Watsco would cost about $424.51 a share, $16.4B for all its shares.
| Premium | % | Price a share | All shares |
|---|---|---|---|
| Low end (a quarter of deals paid less) | 14.7% | $347.79 | $13.4B |
| Median | 40% | $424.51 | $16.4B |
| High end (a quarter paid more) | 60.2% | $485.76 | $18.7B |
The odds, from history
Historically 1.5% of companies with its figures were bought within a year (0.31× the average). Its figures put it in decile 1 of 10 (10 = the most likely to be bought). The odds come from a model of every merger proxy, tender-offer response and going-private statement filed on EDGAR since 2011, set against each company's size, margins, debt, cash flow and growth the year before.
Watsco's latest quarter
Watsco, Q3 2026: revenue $2.2B (+7% year over year), operating margin 10.1%, net earnings $155M, operating cash flow $325M. The chart follows the revenue to costs, profit and cash.
Questions
Is Watsco being acquired?
No headline, 8-K or 13D about a sale is on file in the last year.
Could private equity buy Watsco?
A leveraged buyout at today's price plus 30% ($394.19 a share) would return a loss of about 2% a year to a private-equity buyer over 5 years; the most a buyer could pay for a 20% return is $202.65 a share (−33% against today's $303.22).
What would a takeover of Watsco cost?
Takeovers in its sector paid a median premium of 40% over the share price before the deal (the middle half 14.7% to 60.2%), according to the 20 merger proxies and tender-offer responses on EDGAR that state a premium. At the median, Watsco would cost about $424.51 a share, $16.4B for all its shares.
Updated Nov 8, 2026. Read automatically from SEC filings and public data; errors are possible. Not investment advice.