HVAC M&A Sector Update Spring 2024 - M&A Update, AHR Expo Takeaways & Market Data

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May 17, 2024

Click here to download our 2024 HVAC M&A Sector Update PDF

Middle Market M&A Update

Despite our optimistic prognostications, the eagerly awaited rebound in general M&A activity for the middle-market did not materialize as expected in the fourth quarter of 2023.  Business owners were still focused on closing out the year to hit budgets and navigating a somewhat tepid economic outlook, while private equity investors prioritized increasing value within their existing portfolio companies. Banks reluctantly lent only to high quality companies while interest rates remained elevated.   M&A activity continued to be light as only a few “A+” companies (i.e. very well-run companies) still traded at strong valuations, while “B” and “C” companies continued to sit on the sidelines.  Early into 2024, we are beginning to see some springtime ‘green shoots’ with a pronounced uptick in enthusiasm from investors ready to jump back into the buyer pool, and pre-sale M&A prep work from would-be sellers. Admittedly, even considering those positive indications, deal volume is still not yet to the levels that we had hoped.  We believe that there is a tidal wave of deals building on the horizon, but the timing of when that wave descends on the shoreline is yet to be determined.

The CMG team just recently returned from DealMax24, the largest middle market M&A conference in the US, hosted by the Association for Corporate Growth in Las Vegas.  All 3,200 M&A professionals (private equity funds, investment bankers, and other transaction advisors) in attendance are excited to get back to work, thawing from doldrums of the past 18 months.  From our week-long schedule of meetings with investors, we anticipate M&A activity to ramp as we progress throughout the year, particularly towards the latter months and into 2025, given both the persistent demand from investors and the coming wave of supply from sellers, which will be facilitated by easing lending markets.

HVAC M&A Market Update

As for HVAC M&A, we need to break it down into particular segments as each one is unique and differentiated, though all fall under the general M&A market dynamics that we outlined above:


Valuations for manufacturing and equipment providers continue to hold steady.  Interest will still be concentrated on those companies that can take advantage of secular tailwinds such as increased efficiencies, green technology and indoor air quality.  Those that can demonstrate a strong and defendable growth trajectory and differentiated technology offerings will continue to be highly valued.  We anticipate that larger strategic buyers may outbid private equity investors in this space as the demand for innovation and growth will remain important themes driving M&A.  Corporates’ cash-rich balance sheets also give them the edge currently, though our market feedback suggests that the lending environment – particularly for PE-back transactions – is coming back in full force.


After several years of margin volatility and inventory management challenges, the financial results for distribution companies have begun to normalize to pre-COVID / pre-‘supply chain disruption’ levels, giving both buyers and investors a more realistic and reliable base for valuation.  We expect to see larger players – including both OEMs and PE-backed companies – compete for dominant market share and incremental scale in target markets.  This should continue to drive valuations for distribution companies and should lead to favorable M&A market dynamics (both interest and value) even for smaller distribution targets in smaller markets.


The last few years have certainly been a frenzy of M&A activity in residential HVAC services (“HVAC is hot” jokes aside), resulting in huge valuation multiple increases.  Now, however, investors feel that residential HVAC services have been ‘picked over’ since the pandemic, with only a handful of sizable independent platform companies available.   As a result, we believe that existing ‘buy and build’ residential platforms will continue to gobble up smaller players and capture efficiencies that come with scale, albeit at lower multiples than were seen at the previous height of M&A activity in 2021-2022.  With a dearth of attractive targets in residential services, many PE investors are beginning to shift their attention to commercial services where there are still plenty of platform opportunities and ample ‘bolt-on’ targets.    We anticipate that multiples for commercial-centric services will improve as demand shifts to those targets, especially for businesses with strong visibility in less cyclical end markets (such as education, digital infrastructure, healthcare) and those with robust recurring revenue profiles.  While we do not advocate that owners attempt to time the market, commercial service companies may find their ‘sweet spot’ later this year once the general M&A markets show more activity.  

Start Preparing Now

Preparation is often the defining factor between success and failure in today’s fast paced M&A markets – so start preparing now.    We highly recommend building your team of ‘Core Four’ advisors, each of whom is critical to your success. And remember that ‘A Failure to Plan is a Plan to Fail’.

As always the team here at CMG is here to help, so please do not hesitate to reach out with any questions or feedback.

Key Takeaways and Insights from 2024’s AHR HVAC Expo

CMG made our annual trip to the AHR Expo this January.  AHR continues to be the bellwether conference for “all things HVAC-related” and an important gathering of industry and thought leaders to start the year, highlighting key trends and topics in the industry. Here are our key takeaways from the event based on recurring themes we saw and industry experts we spoke to, with an eye toward what it portends for the rest of 2024:

Pricing and inflation

Rising prices for materials, components and increases in labor costs have put real pressure on both margins and profitability. We have already seen announcements from most major OEMs declaring price increases that have become effective from January through mid-year 2024. Overall, it seems that most business owners have been successful in raising prices to cover increased costs. The result is that while there is a higher price for the end user, manufacturers, distributors, and even service providers, are well positioned to maintain or grow margin in the current environment.

Supply chain observations:

Supply chain challenges continue to ease but are not fully resolved. Interestingly, we have noticed a shift towards equipment agnosticism among HVAC service providers in the U.S., prioritizing product availability over brand loyalty. Additionally, the A2L transition will continue to make the equipment market and product availability hard to forecast and decipher. Companies with cash and capacity to deliver product are expected to win in such times of uncertainty.

M&A Market Recovery Expected in H2’24:

Following a universally slow year in 2023 for M&A, markets remained sluggish to begin 2024 though, in general, sentiment in the HVAC sector remains upbeat.

Implications for Family-owned Businesses

For family-owned businesses contemplating a sale soon, now is an opportune time to start planning for an M&A market process. Whether you are actively considering an exit or just curious about options for the future, we would love to connect, learn more and truly understand your objectives.

We are happy to share our insights and help explore strategies to maximize the value of your company and enhance the legacy of your business.

About Carter Morse & Goodrich

Located in Southport, Connecticut, Carter Morse & Goodrich is a boutique M&A advisory firm that specializes in representing founder-led and family-held businesses valued between $25 million and $250 million. While CMG provides a full range of investment banking services, our primary focus is representing owners who are pursuing their once-in-a-lifetime M&A transactions. CMG specializes in advising leading companies in niche markets to plan, prepare, execute, and close successful transactions that maximize shareholder value. CMG fully understands and appreciates the unique dynamics of closely-held businesses and the importance of owner legacies. For 35 years, the combination of our hands-on approach, senior banker attention, strategic guidance, seamless transaction execution and extensive network of domestic and international resources has enabled us to become a trusted advisor to hundreds of business owners.

CMG's Broker/Dealer affiliate, Carter Capital Corporation, is a FINRA member firm registered with the SEC and SIPC.

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