Four reasons why mergers can be an excellent strategy in the HVAC industry

How to improve the value of your HVAC firm by AccessHeat Inc? The HVAC business boost market is already very big, with a value of $25.6 billion in the United States alone. It makes sense that HVAC businesses would be busy because nearly every home and commercial property in the country has a heating system and air conditioning, which is becoming an essential service as well. The growth won’t stop at its current numbers. Estimates suggest the HVAC services market could grow to $35.6 billion by 2030. Other estimates say that HVAC companies could experience a compound growth rate of 9.7% between 2019 and 2025, so there’s money to be made if you handle your business the right way. And that’s just for HVAC services. The HVAC systems market is valued at $15.16 billion as of 2020 and could experience a compound annual growth rate of 6% between 2021 and 2028.

Going by these numbers, sustained growth is inevitable. Now is the time to look at your merger and acquisition options — whether your goal is to expand or cash out. Of course, the HVAC industry’s growth means that mergers and acquisitions could become more expensive as business owners realize the actual value of their organization. As a result, any company interested in expanding must do its due diligence before making an offer.

If you want a successful M&A deal, you should always work with the right team. Sometimes business owners think they can do it alone and end up making mistakes along the way. Professional deal makers can create the exact leverage you need to reach a successful deal. It is in your interest to have a deal maker by your side as the other side will also have a team of professionals. As Mordechai Gal, operations director at AccessHeat Inc, puts it “Your business should always have proper financial records, especially when you want to exit. It is important that you understand working capital, as it will impact the deal. Have a thorough understanding of how things flow in several accounting statements, such as a profit and loss. You should also have a good idea of your balance sheet when walking into an M&A deal.”

Sustainable Building Design is a trend that adds value to the HVAC business : Sustainability is a primary consideration when designing new buildings, often referred to as green buildings design. HVAC is a key component in green buildings design as it is one of the primary energy consumers. The increased focus on sustainability has led to several advancements in the industry, such as ventilation systems using more use of natural airflow to lower the energy consumption of the facility. HVAC systems using alternative power sources and using new building materials that help to maintain a more constant temperature in the buildings where a powerful HVAC system isn’t necessary.

In the last few years there has been a significant increase in M&A (Mergers and Acquisitions) activity in the HVAC segment. This activity has moved from what used to be large transactions, down to smaller family-owned companies. As owners face the decision to sell, or investors to buy, here are some elements to consider. Financial performance: This is a core element of the business value; however, surprisingly it may not always be the most important to the transaction. Key components of your financial performance are: Revenue, EBITDA, ROS – Return on sales, ROA – Return on assets.

Pandemic fatigue is a significant issue, too, so we could also see business owners who were thinking of selling in the next five years or so bump up their retirement plans. The stress of running a business during the pandemic was enough for many HVAC and plumbing business owners, pushing them towards the negotiating table in 2021.

The HVAC industry is a pillar in the construction field. Being one of the most profitable businesses, small family-owned companies have flourished in this segment for many generations. Like other viable industries, it is widely understood that there are many moving parts that need to be always operating efficiently in order to keep success at the forefront. Due to the multi-faceted nature of this business class, HVAC companies have evolved into an ideal candidate set to reap the benefits of consolidation and AccessHeat are experts in this field. Generational handovers without proper succession plans and lack of a full C-Suite of executives have been the main drivers of the numerous recent mergers and acquisitions. To the benefit of the younger generation once set to inherit these businesses, they are now left with the freedom to pursue higher education and their own personal career fulfillment paths. They have had the burden of taking over the family business removed from their conscience.