“We have had an excellent relationship with Lennox, but I have also expressed my concerns [about their alliance with Service Experts]. I think there is a conflict of interest there. I’ve taken steps to cement my relationship with Bryant and Rheem.”

Welsch added that he had opportunities to get in with ARS on the ground floor but said, “We have no intention of selling to anybody.”

He watched as consolidator Blue Dot moved into the St. Louis market by acquiring an area contractor, but he hasn’t noticed any change in the way the company is doing business. He thinks there aren’t too many hvacr contractors in his market that are attractive to consolidators, maybe because St. Louis is a union town, not typical of consolidator acquisitions, or for another reason.

“Consolidators have bought up all of the companies they wanted — the buyable ones,” he said. But he pointed out that buying contractors does not ensure overnight success.

“When consolidators have to start making a profit instead of buying one, there are going to be problems,” he said. “There seems to be a stronger drive to make quarterly earnings rather than positioning one’s business for two or three years from now.”

Owner Exodus

Welsch said that as a result of the “ownership migration,” customer service has suffered. “People like calling you up and talking to a real person,” he said. “They don’t like this new way consolidators are running their businesses.”

He added that a recession or a downturn in the economy will hurt consolidators who have “got to work hard to keep the stock value up.”

Welsch thinks his successors will come from within his company and that the future owners will work hard to keep the company traditional and independent. He is very confident that Welsch Heating & Cooling will thrive, and welcomes the challenge from consolidators.

“Seven hundred more consolidators in town would be a good thing for us,” he quipped.

Publication date: 09/25/2000