Caption: Danielle Putnam (left) moderates a discussion of private equity investment in HVACR companies at the 2020 AHR Expo with AJ Brown of the Apex Service Partners (middle) and Jordan Wadsworth (right) from Sun Capital.
Private equity firms are investing millions of dollars into the HVACR industry, specifically small- to medium-sized contracting firms led by company founders. Danielle Putnam, president of The New Flat Rate and past president of Women in HVACR, moderated a panel discussion on the subject at the 2020 AHR Expo Feb. 4, with private equity investors AJ Brown, CEO of Apex Service Partners, and Jordan Wadsworth, managing director at Sun Capital.
Why are private equity investors interested in this industry? “Because it’s a repeatable business,” Wadsworth said. “Investors don’t like to take big risks; they’re looking for that repeatable business that can be found in mature companies with brand awareness in their communities.”
In addition, the industry also is going through a positive change in lead generation and analytics. It’s also a fragmented industry, with a lot of small or mid-sized businesses — an ideal size that investors are looking for, he added.
The goal of investors in this space is not to lay people off; it’s the exact opposite.
“We like to keep the entrepreneurism of the founder and provide the capital needed to make the business better, which helps you serve your customers better,” Brown explained. “We want to add more techs to your payroll, not get rid of them.”
Items such as preventative maintenance plans indicates a company has “sticky customers” — those who stick around because of the great service and brand loyalty, he added.
Wadsworth noted there are three key initiatives a private equity investor has when buying into an HVAC contracting business: increasing add-ons, employee retention and decreasing customer acquisition costs.