m&a news in hvac · hvac is a growth sector 1) ibisworld industry report 23822a: heating &...

HVACM&A SPOTLIGHT ONSUMMER 2019

• July 9, 2019: O’Connor Company, a Midwest-based HVAC distributor, has acquired the Oklahoma City branch of Hunton Distribution, positioning O’Connor as the sole distributor of Trane Products in Oklahoma

• June 14th, 2019: Right Time Heating and Air Conditioning Canada completes acquisition of Home Aire Care Heating and Cooling

• May 20th, 2019: Huron Capital-backed Pueblo Mechanical & Controls acquired Westover Corporation• May 15, 2019: CenterOak Partners announced it completed a majority investment in Service Champions,

merging the business with existing platform investment Moore Home Services to create one of the largest residential HVAC contractors on the West Coast

• April 26, 2019: Anvil International and Smith-Cooper International have entered an agreement to merge. The combined company will be majority owned by Tailwind Capital

• April 8, 2019: The Wrench Group was acquired by Leonard Green & Partners from the previous institutional owner, Investcorp

• March 26, 2019: Servpro, a provider of diversified household/commercial services including HVAC restoration, was acquired by the Blackstone Group for more than $1 billion

• March 14, 2019: HomeServe USA has doubled its HVAC workforce with the acquisition of CroppMetcalfe Inc.

• March 8, 2019: Private equity investor AE Industrial Partners acquired Resolute Industrial Holdings, a provider of HVAC rental solutions

• March 6, 2019: ABC Refrigeration was acquired by Coolsys• Feb 11, 2019: The parent company of Angie’s List acquired home repair & warranty service provider

Fixd. Fixd provides warranty and repair services for home repairs, HVAC equipment and other major household items

• January 29, 2019: Austin-based Stan’s Heating & Cooling was acquired by regional private equity firm Treaty Oak Equity

• January 2019: HVAC replacement, retrofit, and repair services platform, Pueblo Mechanical & Controls completed 3 acquisitions, adding Commercial Air Inc., Newgaard Mechanical Inc., and CFM Mechanical LLC

M&A NEWS IN HVAC

Source: Company Press Releases

2

M&A SPOTLIGHT: HVAC SUMMER 2019

Leading to significant

M&A activity in the

sector

HVAC IS A

GROWTH SECTOR

1) IBISWorld Industry Report 23822a: Heating & Air-Conditioning Contractors in the US NOTE: In USD billions 2. Capital IQ 3. US Census Bureau & IBISWorld 4. YTD: Jan - May

Driven by strong growth in new residential construction starts and rising disposable income, growth in the HVAC market has steadily outpaced the economy as a whole...

1-459.8%5-9

18.6%

10-19, 11.6%

20-99, 8.9%

100+1.1%

Establishments by Employment Size

1

3

2

While HVAC sales and service remains extremely

fragmented...

80.792.8

103.9

2013 2018 2023

HVAC Market Size (US$ Billions)

+ 15%

+ 12%

4

1.6

5.1

1.2

3.8

2.0

2014 2015 2016 2017 2018 2019 YTD

Total M&A Transaction Value (USD$ Billions)

3


TRENDSOngoing Consolidation

IN THE HVAC INDUSTRY

HVAC Industry Confident Heading Into 2019According to Recent AHR Expo and ASHRAE Journal Annual Economic Outlook Survey

1) AHR Expo and ASHRAE Journal Annual Economic Outlook Survey

• Private equity and strategic players are consistently looking for growth via acquisition

• These large groups are acquiring strong regional providers in an ongoing effort to consolidate the market

Skill Shortages• Many trades, including HVAC, are facing

labour shortages as boomers retire and aren’t being replaced by knowledgable newcomers

• HVAC firms are having to compete for skilled employees by offering attractive compensation and training/development packages

Smart Technology• Residential and commercial customers are

increasingly looking for efficiency in new technologies

• Developments in connected technologies are driving demand for new whole-home solutions encompassing smart controls, HVAC, monitoring and other related solu-tions

• Service providers that are fully knowledgable regarding new technologies can differentiate themselves to both clients and buyers

Evolving Business Models• Small/mid-sized providers are increasing-

ly looking at new business offerings such as online sales, financing and service agreements to boost sales

• These and other forward looking business model changes can drive significant value to buyers

Yes87%

Anticipating Positive Business

Yes67%

Expecting Sales Increase Over 5%

Yes64%

Organizations Intending to Debut New Products

4


SALE OF THE WRENCH GROUPHVAC CASE STUDY

Source: Company press releases

• The Wrench Group was acquired on April 8th by Leonard Green & Partners from the previous institutional owner, Investcorp

• Headquartered in Marietta, Georgia, Wrench was formed in 2016 through a merger of four businesses in Atlanta, Dallas, Houston and Phoenix and has since grown to include 4 additional businesses in Denver, Tampa and the original geographies

• Wrench now covers 7 metro areas under different brands and is one of the largest providers of residential HVAC services in the US

• The Wrench Group has 1,250+ service trucks, 1,900+ employees and serves 350,000 customers annually

• LGP is a Los Angeles based private equity firm founded in 1989

• LGP primarily focuses on services businesses and has made over 90 investments throughout its history

• LGP’s most recent fund was closed in 2016, with US$9.6 billion in committed capital

• Investcorp is a global manager of alternative investments, focused on high growth, cash flowing mid-sized businesses in the US

• Investcorp has US$22.5 billion in assets under management and has made over 185 private equity investments across the globe since 1982

Abacus Plumbing

Baker Brothers

Coolray

Parker

Plumbline

Ragsdale

Berkeys

Cool Today

Wrench Group Operations

5


RECENT TRANSACTIONS

PUBLIC COMPANIES

Source: Capital IQ & Company Press Releases

6.6x

4.4x 3.9x3.2x 3.0x 2.8x

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Average: 10.0x

HVAC Service HVAC Manufacturing

10.8x9.7x 9.6x

7.2x

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11.2x10.3x

9.3x 9.2x

6.7x

17.5x

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TEV / 2019E EBITDA TEV / 2020E EBITDA

6


Shaun Quennell Vice President - Primary Contact

[email protected]: 416-800-1768

Rob PenteliukPrincipal


Jim OslerPrincipal


ABOUT ORIGIN MERCHANT PARTNERSOrigin Merchant Partners is a leading independent investment bank providing acquisition and divestiture services across North America. For additional information on the matters contained herein please contact any member of our team below.

\

Catherine David NolanSenior Advisor


Kent GodinhoAnalyst


Roxanne SwatogorBusiness Development Manager


m&a news in hvac · hvac is a growth sector 1) ibisworld industry report 23822a: heating &...

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