As climate change continues to drive extreme weather conditions, the heating, ventilation, and air conditioning (HVAC) industry is evolving rapidly.
HVAC companies are increasingly focusing on energy efficiency, decarbonization, and smart home tech to help commercial, industrial, and residential customers adapt.
The opportunities are massive. The global HVAC market was worth around $216B last year, and it’s projected to grow to $390B by 2033.
With over 29,000 privately-owned companies operating in the space, the HVAC industry has a wealth of opportunities for private market investors as well.
In this PE Playbook, the Grata team has put together the need-to-know trends for investors considering making moves in the HVAC market, including:
- How the industry is fragmented
- Which segments are seeing the most growth
- Notable acquisitions and roll-up activity
Source: Grata
The market map above is not intended to be an exhaustive representation of companies in the space.
Companies that provide services that fall into multiple segments are categorized in this report by their primary offering.
Industry Overview
Market Distribution
Geography
Source: Grata
In the US, HVAC companies are most densely concentrated in states that A) have large populations, and B) typically experience extreme seasonal weather (California, Texas, Florida, New York, Illinois, etc.).
However, one of the main draws of the HVAC industry is that its services are needed everywhere — even in more moderate climates. For example, North Carolina, Virginia, and Georgia are among the top 10 states with the highest number of employed HVAC workers. The South is also the fastest-growing region in the country in terms of population, which will inevitably drive demand for HVAC services. Additionally, the region has lower costs of living compared to areas like California, New York, or Massachusetts.
Ownership
Source: Grata
The vast majority of companies in the HVAC space are independently owned. Currently, there are 29,053 private companies ripe for acquisition.
Middle-market companies comprise 25% of the industry.
Segment Distribution
Source: Grata
This report focuses on the following segments of the HVAC industry. Grata users can see curated lists of some of the companies used to create each segment by clicking the links below.
Public Comparables
Source: Grata
Because of the necessity of their services and the growing demand for energy-efficient systems, HVAC companies are strong financial performers across the board.
Commercial HVAC companies see significantly higher revenue on average due to the scale and complexity of the projects and systems they work with. These tend to yield higher-value contracts, which often include maintenance agreements that provide the companies with recurring revenue. Additionally, because commercial HVAC technicians must have advanced qualifications and specialized expertise, they can charge premium rates for their services.
However, one thing to note about the commercial sector is that it brings in the bulk of its revenue from new construction installations. As a result, it's more vulnerable to shifts in the economy.
The residential market leads in terms of EBITDA margins and revenue growth. Companies in this market generally have a more consistent customer base than the other two segments. Residential work tends to be driven by maintenance rather than new installations. Demand for these services will continue to climb as the climate changes, driving value to investors. Ongoing consolidation of mom-and-pop businesses in the space is also adding to the value of companies in the space, boosting multiples.
Meanwhile, the explosion of AI and other advanced tech solutions is driving up demand for industrial HVAC applications in industries like healthcare, semiconductors, aerospace, and data centers, according to Benchmark International. Using a considerable number of advanced electronics means these industries consume a tremendous amount of power. As a result, they need high-quality HVAC systems to maintain safe operating temperatures and help minimize carbon emissions.
Private Comparables
Source: Grata
In the private sector, the commercial HVAC market pulls in the most average revenue by far. Because commercial systems are typically larger and more complex than residential systems, they tend to be more lucrative. The projects require commercial HVAC technicians and engineers, who have specialized training and certifications. Commercial HVAC companies also frequently lock in long-term maintenance contracts with large buildings, which yield consistent revenue streams.
Meanwhile, the industrial HVAC market is seeing the most average annual growth. This is largely tied to the industrial construction industry, which is also seeing significant growth. Dealmakers should look to areas experiencing population surges and infrastructure development, as these will drive demand for more large-scale HVAC services.
Acquisitions
Roll-Up Activity
Source: Grata
The HVAC industry has seen a significant amount of roll-up activity over the past several years. Apex Service Partners leads the pack with 107 acquisitions in the space. The bulk of its acquisitions are in the residential and commercial sectors.
Recent Acquisitions
Source: Grata
EARNZ Acquires South West Heating Services and Cosgrove & Drew
In August, UK-based energy services group EARNZ acquired South West Heating Services and Cosgrove & Drew for $1.5M and $2.5M, respectively. EARNZ focuses on acquiring companies in the residential and commercial sectors that are working towards achieving net-zero carbon emissions.
South West Heating Services offers installation and maintenance services for residential gas boilers. Cosgrove & Drew provides mechanical engineering services for domestic heating and plumbing systems.
If you’re an investor interested in companies similar to South West Heating Services, try these:
If you’re interested in companies similar to Cosgrove & Drew, try these:
Learn more about these acquisitions — or any of the others listed below — anytime, anywhere using the latest version of the Grata Go mobile app. Get all of the ownership and investment data you need right in the palm of your hand.
Source: Grata
Goldman Sachs Group Acquires Sila Services
Goldman Sachs Group completed its $1.7B purchase of Sila Services, a provider of HVAC, plumbing, and electrical services, in November. Prior to the acquisition, Sila Services operated over 30 companies across the Northeast and Mid-Atlantic regions of the US.
If you’re an investor interested in companies similar to Sila Services, try these:
Limbach Company Acquires Consolidated Mechanical
Limbach announced its $23M acquisition of Consolidated Mechanical in December. Kentucky-based Consolidated Mechanical offers HVAC system installation in addition to a wide range of mechanical services for the industrial and commercial markets.
Michael McCann, President and CEO of Limbach, said, “This acquisition enhances our regional footprint and increases our ability to provide solutions and services to our national customers. Additionally, CMI extends our reach into industrial mechanical services, including power generation, food processing, manufacturing, and metals end-markets, and by significantly broadening our service offerings.”
If you’re an investor interested in companies similar to Consolidated Mechanical, try these:
Airtron Heating & Air Conditioning Acquires Sierra Air Conditioning
Earlier this month, Airton Heating & Air Conditioning purchased Nevada-based Sierra Air Conditioning for an undisclosed amount. Sierra provides HVAC system installation services for new homes in Nevada and Idaho.
The deal reportedly expands Airtron’s footprint in the western US, and establishes the first national HVAC installation business focused on the single-family residential new construction market.
If you’re an investor interested in companies similar to Sierra Air Conditioning, try these:
Live Deals
Hundreds of live deals and active mandates are being showcased on the Grata Deal Network. Grata clients can see the examples of mandates related to the HVAC industry in the Grata platform:
- A North Carolina-based HVAC company with around $5M in annual revenue
- A New Jersey-based HVACR company with $3.3M in annual revenue and an expected valuation of $1.4M
- A family-owned HVAC business with an automated ecommerce platform, earning $3M in annual revenue
If you’re interested in these deals and you want to see more, register to learn more here.
Are you a sell-side advisor interested in generating inbound leads for your data center infrastructure deal? Get started here.
Get the Most Out of the Playbook
If you’re an investor interested in making moves in the HVAC space, Grata can help you put the insights in this article into action.
From in-depth market research to sourcing to pipeline management and relationship nurturing, Grata’s end-to-end dealmaking platform streamlines your workflows so that you can close more deals.
Schedule a demo today to get started.
