Four reasons why mergers can be a good strategy 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. Why the HVAC industry is growing? Before expanding your HVAC company, it’s a good idea to look at why the industry is growing to better understand its sustainability. There’s more than one catalyst for this expansion, which is good news for its long-term viability. First, there’s an influx of new construction projects all over the country, and everything that goes up needs an HVAC system. Spending on construction increased from $809.26 billion in 2010 to nearly $1.3 trillion in 2018. In addition, there were 6% more homes constructed in July 2018 compared to July 2019.
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 Mordecai 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.
Running an HVAC business is one thing, but selling it requires a different level of expertise. There are many things to consider – pricing, valuation, marketing, finding the right buyer, and more. As the owner, you’ll naturally have a bias toward your company. This could impair your ability to make the best decisions when selling your HVAC business. Making a mistake or error in judgment could cost you significant revenue at this very important time in your business. That’s why is very important to work with a HVAC M&A specialized aquisition firm.
For a seller, it makes sense to test the market now because the economy is opening up and there is less hesitancy in the marketplace. Many business owners who were planning to sell last year might have decided to wait. After all, the market was highly unpredictable in 2020, and it scared both buyers and sellers into putting M&A off to see how things played out. With the economy and health situation trying to return to normal and valuations holding up, much of this hesitancy is evaporating. That has created a situation where there’s motivation to get these deals done in a hurry. Business owners who ended up holding on to their companies for an extra year could be looking for a quick out now that they know they’ll be getting fair value.
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.
