Six reasons why consolidation can be a good idea in the HVAC industry? The HVAC business boost market is already very big, with a value of $25.6 billion in the United States alone. Growth in the HVAC industry could make your business more profitable but brings challenges when negotiating mergers and acquisitions. The HVAC industry is expanding thanks to growing demand for contractors who handle heating and air conditioning installations, repairs, and maintenance all over the country. This news is positive if you already own an HVAC company because you could see your organization get far busier and more valuable in the coming years.
You can also capitalize on this growth by expanding your business in your local area by acquiring another company or merging with it. There is risk in any M&A agreement, but the HVAC industry shows no signs of slowing down because there will always be demand for these services. That makes it one of the safer industries for M&A to work out well for both sides. At the same time, not all mergers and acquisitions are the same, so doing your due diligence before signing any transaction is essential.
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.”
One of the most important things business owners overlook when preparing to exit is the financial state of the business. It is not uncommon to find sellers with unrealistic expectations that may be 5 times more than the actual value of the business. As a business owner, you should first be aware of your EBITDA. Your EBITDA is important as it helps you gauge the profitability of your company. It eliminates some of the non-operating decisions made by a firm’s management, which gives you a better picture of the business’ value. Another way to scrub the numbers is by ensuring that the add-backs are right. Some business owners even carry out annual audits and use a scorecard to gauge their business performance. This helps you gauge whether you are winning or losing.
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.
There have been hundreds of HVAC mergers & acquisitions over the past few years, and the trend is continuing to grow as time passes. As a result of this changing tide, AccessHeat Inc. has identified an opportunity that benefits all parties involved. Investors and business owners alike are finding that strength in numbers, and a blending of skills has made it possible to fill gaps within businesses and build a more solid bridge to success. Small companies with different redeeming qualities have joined together to become powerhouses in the HVAC world and weave their talents together. With an abundance of capital, many investors like us are eager to help these companies grow exponentially. We are uniquely positioned to put our working capital into the market so that you can plan the successful exit you always envisioned.