Apr 22, 2024

HVAC Equipment Sector M&A Update – April 2024

HVAC Equipment Sector
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Pioneering Climate Control Technologies Drive HVAC Equipment Sector M&A Activity

The Heating, Ventilation, and Air Conditioning (HVAC) Equipment sector is positioned for growth as it serves new industrial applications and plays an important role in maintaining critical assets and infrastructure. Progressive technologies were forced to take a decisive backseat in 2023, while the HVAC sector was largely upheld by repeated themes of cost-saving energy strategies and the shift from analog to digital equipment and was supported by increased government spending. The year 2024 has already painted a new picture. Through year-to-date (YTD) March, merger and acquisition (M&A) has increased 41.7% compared to the same period last year. In addition to more deals materializing, leading public players investing in pioneering technologies for HVAC equipment has invigorated new end-markets.

Technologically advanced industrial applications for HVAC parts and systems have proliferated in end markets such as Aerospace, Healthcare, Semiconductors, and Data Centers. These verticals have significant demand for power and are increasingly requiring highly precise and stable environmental controls to manage their assets. As much of the power consumed by advanced electronics equipment turns to heat which needs to be dissipated and exposure to temperature extremes can lead to costly product degradations and failures, the market need for industrial HVAC applications is growing strongly. Increased government policies that have supported the domestication of manufacturing are also indirectly creating demand for such environmental controls. Legislation such as the Infrastructure Bill, Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act is Increasing demand, and even the Inflation Reduction Act (IRA) is directly targeting energy efficiency.

Anecdotally, Amazon’s (Nasdaq:AMZN) acquisition of a 1,200-acre, 960-megawatt (MW) data center, powered by 2.5-gigawatt (GW) nuclear power plant (March, $650 million), has highlighted the recent push for increased power generation to drive its operations, according to the Construction Review.1 The acquisition is the latest among Amazon’s power supply pursuits but Amazon also recently entered into a purchase agreement with Avangrid (NYSE:AGR) that includes 40 wind turbines that produce 90 MWs of wind energy. Global consumption of electricity by data centers reached 460 terawatt-hours (TWh) in 2022, a number projected to reach 1,000 TWh in 2026, according to an International Energy Agency (IEA) report2 and that is also putting pressure on operators to be both emissions-friendly and energy efficient. Low-emissions sources are poised for significant growth and have been forecasted to account for almost half of the world’s electricity generation by 2026, up from 39% in 2023. The increase has marked a significant change as the Power sector has historically contributed the most to global carbon dioxide (CO2) emissions, according to the IEA. Efficient, powerful HVAC equipment is complementary to these developments and is expected to be at the forefront of helping manage energy consumption in 2024 and beyond, which is correspondingly anticipated to drive demand for more merger and acquisition activity.

The increases in computational power within our economy generate a ton of heat that needs to be efficiently managed and that bodes well for manufacturers of advanced HVAC equipment.

Ted PolkManaging Director, Co-Head of Industrials, Capstone Partners

HVAC Equipment Sector Deal Volume Experiences a Resurgence in 2024

Total HVAC Equipment sector deal activity has risen 41.7% YOY to 34 deals announced or completed in YTD 2024. Private strategics have maintained their presence in the space with ten deals announced or completed to-date, an increase of one deal YOY. Despite the elevated financing environment, private equity acquisitions have remained prevalent, with eight financial acquisitions announced or completed in YTD, a 33.3% increase YOY. In contrast to strategic buyers, private equity add-ons have focused on improving product mix and geographic reach rather than large, transformational investments in technologies and entries into new end markets. Defensible gross margins and rising demand have contributed to robust M&A pricing in the HVAC Equipment sector. Disclosed multiples in the HVAC Equipment space have averaged 1.6x EV/Revenue and 12.8x EV/EBITDA from 2021 through YTD 2024, compared to 1.6x EV/Revenue and 13.8x EV/EBITDA in the broader Industrials industry over the same period.

As the financing environment loosens and investment holding periods become exacerbated, private equity firms are expected to start divesting more assets. Of note, Montage Partners did just divest its holding in Southwest Data Products (SWDP), a leading manufacturer of airflow containment systems, server enclosures, and cable management systems used in advanced data centers, to Nucor (NYSE:NUE) for $115 million in April. Since Montage acquired SWDP in 2017 (undisclosed), SWDP’s revenues increased by 500% and expanded headcount by 80%, according to a press release.3 The acquisition marks Nucor’s launch of Nucor Data Systems, a new business unit to serve customers in the Data Center Infrastructure space. “This acquisition will give us new capabilities to serve a rapidly growing market and will bolster Nucor as a preferred supplier to many of the nation’s largest and most innovative hyperscale cloud and colocation data center operators. The SWDP acquisition furthers our expand beyond strategy to invest in steel centric businesses that operate outside of the cyclical nature of steel production,” said Chad Utermark, Executive Vice President of New Markets and Innovation, in a press release.4

Public Players Enter M&A Market in Force, Prioritizing Revenue Generation

Public strategics have entered the M&A market with a significant presence in YTD, accounting for 47.1% of deals compared to 37.5% in the prior year period. Public players have seen share prices appreciate 13.3% through YTD compared to 4.2% growth in the Dow Jones Industrial Average. Notably, SPX Technologies’ (NYSE:SPXC) HVAC segment witnessed 14% revenue growth YOY in Q4 driven solely by inorganic M&A (15.7%), as organic revenue declined 2% YOY, according to Its Q4 2023 earnings transcript.5 Other equipment manufacturers including AAON (NYSE:AAON), recorded net income growth for 2023 of more than 75%, triple the net income of 2021, according to its earnings transcript.6 Meanwhile, Trane Technologies' (NYSE:TT) Commercial HVAC backlog rose $700 million in 2023, tripling since 2021, according to its recent earnings transcripts.7 Evidently, public players have capitalized on robust earnings to stimulate continuous growth through acquisitions.

Equipment Demand Burgeons as Key End Markets Require Greater Temperature Control

Infrastructure used for data centers and crypto mining has been known to release significant amounts of heat and has been further exacerbated by heightened demand and technological advancements in artificial intelligence, machine learning, and crypto currencies. As a result, HVAC equipment companies have been developing new technologies to provide efficient cooling solutions. Leading public company players have continued to utilize M&A to adapt to evolving sector demands, which is expected to spur steady transaction activity in the near-term. To-date, public strategics have increased acquisition activity to meet this growing demand. Several notable deals are highlighted below.

  • Modine Manufacturing Acquired Scott Springfield Manufacturing (February, $190.1 Million, 1.9x EV/Revenue) - Global leader in innovative thermal management and ventilation solutions, Modine Manufacturing (NYSE:MOD), acquired Scott Springfield Manufacturing, a leading manufacturer of air handling units (AHU) in February for an enterprise value of $190.1 million, equivalent to 1.9x EV/Revenue. The two companies have highly complementary product portfolios, providing Modine with a blue-chip customer base in Hyperscale & Colocation Data Centers, Telecommunications, Healthcare, and Aerospace end markets, according to a press release.8 The Scott Springfield acquisition marks Modine's fourth acquisition in the last twelve-months, continuing to build its portfolio of custom AHUs following the acquisition of Napps last year (July 2023, $5.8 million) and immersion cooling assets with the acquisition of TMGcore (January, $12 million).

"Technology solutions that address real-world concerns—such as delivering healthy environments for people and stable environments for the IT infrastructure that supports our digital lifestyles—are more important than ever. Modine's data center and Indoor air quality (IAQ) businesses deliver these world-class HVAC solutions to markets where efficient and effective thermal management and ventilation are vital. The acquisition of Scott Springfield will expand our portfolio and manufacturing footprint, enabling us to meet a complete range of client needs in our targeted data center and IAQ markets, positioning us as a one-stop shop for mission-critical HVAC solutions," said Eric McGinnis, President of Climate Solutions at Modine, in the press release.

  • SPX Technologies Acquired Ingénia Technologies (February, $300.7 Million, 3.0x EV/Revenue) - SPX Technologies a global supplier of HVAC Infrastructure, acquired Ingénia Technologies for $300.7 million in enterprise value, equivalent to 3.0x EV/Revenue (February). Ingénia specializes in the design and manufacturing of custom AHUs in applications that demand elevated levels of precision and reliability including the Healthcare, Pharmaceutical, Food Processing, and Industrial end markets. Ingénia will join SPX's Cooling platform, within its HVAC segment, and further expands the company's position in Engineered Air Movement (EAM) solutions, according to a press release.9
  • Ingersoll Rand Acquired Friulair (February, $146.5 Million, 2.1x EV/Revenue) - Ingersoll Rand (NYSE:IR), a global provider of industrial solutions, acquired Friulair in February in an all-cash deal for an enterprise value of $146.5 million, valuing Friulair at 2.1x EV/Revenue and a low double-digit adjusted EBITDA multiple. Friulair produces dryers, filters, aftercoolers, and accessories for the treatment of compressed air as well as a Chiller product line that serves the Food & Beverage and Pharmaceutical sectors. The addition of Friulair is expected to increase the scale of Ingersoll Rand’s air dryer business, significantly increasing the company’s access to the original equipment manufacturer (OEM) channel and will add new Chiller production capabilities, according to a press release.10

To discuss developments in the HVAC Equipment market, provide an update on your business, or learn about Capstone's wide range of advisory services and HVAC Equipment sector knowledge, please contact us.

Neve Adler, Analyst, was the lead Market Intelligence contributor to this article.


  1. Construction Review, "US-based Amazon Goes Nuclear as it Acquires $650M Atomic Data Centers from Cumulus Data," https://constructionreviewonline.com/construction-news/usa/us-based-amazon-goes-nuclear-as-it-acquires-650m-atomic-data-centers-from-cumulus-data/, accessed April 4, 2024.
  2. IEA, "Executive summary," https://www.iea.org/reports/electricity-2024/executive-summary, accessed April 4, 2024.
  3. Montage Partners, "MONTAGE PARTNERS SUCCESSFULLY EXITS INVESTMENT IN SOUTHWEST DATA PRODUCTS," https://www.montagepartners.com/montage-exits-southwest-data-products/, accessed April 4, 2024.
  4. Nucor, " NUCOR TO ACQUIRE MANUFACTURER OF DATA CENTER INFRASTRUCTURE," https://nucor.com/news-release/20556, accessed April 4, 2024.
  5. Seeking Alpha, "SPX Technologies, Inc. (SPXC) Q4 2023 Earnings Call Transcript," https://seekingalpha.com/article/4672756-spx-technologies-inc-spxc-q4-2023-earnings-call-transcript, accessed April 4, 2024.
  6. Seeking Alpha, "AAON Inc. (AAON) Q4 2023 Earnings Call Transcript," https://seekingalpha.com/article/4674621-aaon-inc-aaon-q4-2023-earnings-call-transcript, accessed April 4, 2024.
  7. Seeking Alpha, "Trane Technologies plc (TT) Q4 2023 Earnings Call Transcript," https://seekingalpha.com/article/4666858-trane-technologies-plc-tt-q4-2023-earnings-call-transcript, accessed April 4, 2024.
  8. Modine, " Modine Acquires Scott Springfield Manufacturing, Gaining Air Handling Unit Offering for Strategic Data Center and Indoor Air Quality Markets," https://investors.modine.com/press-releases/press-release-details/2024/Modine-Acquires-Scott-Springfield-Manufacturing-Gaining-Air-Handling-Unit-Offering-for-Strategic-Data-Center-and-Indoor-Air-Quality-Markets/default.aspx, accessed April 4, 2024.
  9. SPX Technologies, "News Releases," https://www.spx.com/news-and-events/news-releases/, accessed April 4, 2024.
  10. Ingersoll Rand, " Ingersoll Rand Acquires Friulair to Expand Air Treatment Capabilities," https://investors.irco.com/news/news-details/2024/Ingersoll-Rand-Acquires-Friulair-to-Expand-Air-Treatment-Capabilities/default.aspx, accessed April 4, 2024.

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