Lennox announces buyouts of its ‘select’ dealerships

By Thomas Mahoney

DALLAS — Lennox Industries Inc. said it will “aggressively pursue” the acquisition of “select dealerships” in the U.S., following a similar pattern for its Canadian market, where 26 dealers representing $110 million in sales have been acquired.

The vertical integration program mirrors its unique company-owned distribution centers around the country, which is unlike the usual independently owned distribution pattern in the hvac equipment industry.

Lennox’ roll-up of some of its Canadian dealers follows an earlier acquisition of Canadian Carrier dealers by a large Toronto gas utility.

Lennox is acting in response to “an increasingly competitive business environment that is being shaped by utility deregulation and industry consolidation,” said president Bob Schjerven.

More than 250 Lennox dealers have been acquired by the four nationally consolidated contracting companies, Schjerven said in a letter to dealers. The News estimates that more than 500 dealers and contractors — residential and nonresidential — have sold their businesses to the consolidated contractors.

In addition, at least 75 dealers have sold their businesses to utilities in markets like Philadelphia, Detroit, Los Angeles, and Ohio.

Schjerven cited Lennox’ 104-year-long commitment to independent dealers, saying, “We have no intention of jeopardizing this unique strength.”

“Acquired dealerships will not be a disruptive force for other Lennox dealers,” he pledged. He said company pricing policies, marketing messages, and retail selling approaches would not differentiate between Lennox-owned dealerships and other dealerships.

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“Our Canadian initiative demonstrates that we can own dealers in a market and still work with independent dealers in a manner beneficial for everyone.”

The company said its strategy includes:

Supporting its independent dealers (“associate dealers”) with support programs, including new support programs with benefits and advantages like those provided by a consolidator or buying group; and
Strengthening relationships with a new “associate dealer agreement” that provides incremental benefits in exchange for “high levels of loyalty,” and for giving the company the right of first refusal should the dealer decide to sell out. These dealers will also have access to a retirement program for owners.
Lennox territory managers will be visiting dealers to discuss becoming associate dealers, Schjerven said.

The program will be administered through a new retail company with separate headquarters, to be run by Jim Mishler, named president. He was formerly vice president, North American Residential Sales and Distribution.