If the past year was any indication, most plumbing and HVACR business owners must have spent the pandemic planning their exit strategies. I’m unofficially dubbing 2021 the year of the acquisition.
Bradford White Corp. acquired Keltech’s line of tankless electric water heaters; Watts Water Technologies acquired The Detection Group; Autodesk acquired Innovyze; DiversiTech Corp. acquired Fresh-Aire UV; Sioux Chief acquired Sun Drainage and Sigma Corp Trench Drain; Franklin Electric acquired Puronics and New Aqua; Mestek acquired the baseboard assets of Slant/Fin Baseboard; ASC Engineered Solutions acquired Trenton Pipe Nipple Co.; Rheem acquired Friedrich Air Conditioning; Rinnai acquired Industrias MASS; Wilo acquired Quantumflo; and A. O. Smith Corp. acquired Giant Factories to a name a few mergers and acquisitions PM Engineer covered last year.
And that’s not even including all the activity that happened amidst engineering firms specifically. Terracon acquired Burleson Consulting; Dewberry acquired Edmonds Engineering; and EN Engineering made three acquisitions last year: Spectrum Engineering Corp., ESC Engineering and G2 Integrated Solutions.
Mergers and acquisitions can be an effective strategy for growing the bottom line. Companies can consolidate to remove excess capacity, increase market access, expand into new territories, acquire technology more quickly than it could be built, develop new businesses and improve the target company’s performance.
According to FMI Quarterly, the plumbing and HVACR market is highly fragmented.
“The largest privately held HVAC/mechanical contractor in the U.S. is Service Logic, which, with an estimated $200 million in revenue, holds a mere 0.20% of the $100 billion HVACR market,” the report states. “Such market dynamics create an environment ripe for consolidation from public and private strategic parties as well as private equity firms.”
These two industries are attractive to buyers simply because they are recession-proof. Aging buildings, modernization of energy efficiency solutions, heightened awareness of IAQ and ventilation and positive technology trends all foster an ideal setting for favorable growth for plumbing and HVACR contractors, MEP engineering firms and manufacturers alike.
It’s a brand new year. So, take some time to think about where your engineering firm is at — is it to the point where it can’t get any better or you have reached saturation in your market? Maybe it’s time to diversify, grow bigger or possibly both! Now is the time to sit down with your trusted business and financial advisors to map out your mid- to long-term plans.
It will be interesting to see what 2022 brings.