Measuring the success of the current wave of HVACR consolidation is difficult, as the answer varies depending on who you ask. For our purposes, let’s start by looking at it from the perspective of the private equity (PE) industry. PE acquisitions are fueling this consolidation wave, so understanding their approach and wins is integral to understanding consolidation overall. After reviewing the PE industry success, we will look at how consolidation is working for owners as it relates to rollover equity in PE-backed companies.
First off, it’s important to know how PE firms make money. While PE firms do vary in their investment approach, historically they have followed one traditional model — they raise capital based on an investment thesis with an expected rate of return. Once they have raised their targeted amount of capital, they focus on investing that money by acquiring businesses and often growing those businesses via acquisition.