HVAC Equipment Sector M&A Update – April 2025

HVAC Equipment Sector Players Remain Pursuant of M&A and Technology Investments in Integral, High-Growth End Markets

The Heating, Ventilation, and Air Conditioning (HVAC) Equipment market has experienced significant growth, encouraging merger and acquisition (M&A) activity and investments in integral technologies. Sector growth has been buoyed by the growing uses of liquid cooling technologies and the adoption of advanced refrigerants that have enhanced energy efficiency and sustainability across various sectors, particularly in data center and industrial applications. As the Utilities industry undergoes an artificial intelligence (AI) transformation, projections estimate U.S. data-center power demand to nearly triple in the next three years and consume as much as 12% of the country’s electricity, according to a Department of Energy (DOE) report.¹

“The United States has seen an incredible investment in AI and other breakthrough technologies over the last decade and a half, and this industrial renaissance has created greater demand on our domestic energy supply. We can meet this growth with clean energy,” said former U.S. Energy Secretary, Jennifer M. Granholm, in the report. Liquid cooling technology, a critical solution for managing heat in high-performance computing environments has emerged as an alternative option for high-precision cooling demand needed in data center applications. Rising AI-driven data center construction, federal incentives for energy-efficient infrastructure, and broader technology investment trends have fueled recent demand for HVAC equipment, setting the stage for growth in M&A activity during 2025.

Over the past year we have witnessed strong M&A market interest in businesses supporting the growing need and demand for more precise temperature and humidity control in industrial products. This growing demand results from seemingly never-ending increases in the computational capabilities of industrial equipment and the corresponding requirements for increased usage of electricity. It is opening up a new world of opportunities for the HVAC industry outside of comfort cooling.

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

HVAC Equipment M&A Volume Returns to Normalized Growth Levels, Buyers Eye Defensible Portfolio Additions

M&A activity in the HVAC Equipment space totaled 132 transactions in 2024, bucking broader market trends and rising 31.8% from 2023’s trough. In the early months of 2025, total HVAC Equipment sector deal activity has normalized, falling by four deals YOY to 16 transactions announced or completed in year to date (YTD) 2025. However, this total remains 14.3% higher than YTD 2023 volume. Private buyers have comprised the largest share of sector deal activity since 2021 and have represent 50% of announced or closed sector transactions (eight deals) to-date. Private buyers have found opportunities to leverage cash-strapped balance sheets to invest in synergies, securing attractive valuations for businesses supporting diversification and geographic expansion efforts. Notably, Paloma Rheem Holdings, a Japanese air conditioning and water heating company, announced the take-private acquisition of Fujitsu General (TSE:6755) for an enterprise value of $1.8 billion, equivalent to 0.8x EV/Revenue and 14.3x EV/EBITDA (January). For Paloma Rheem, a manufacturer of water heaters, air conditioners, and HVAC systems, the deal provides acquisition synergies that began at the advent of its 2016 partnership with Fujitsu General. The take-private deal has enabled Paloma Rheem to accelerate innovation in Air and Water markets and propel the combined entity towards a greater decarbonized future. Additionally, in July 2024, Robert Bosch, a supplier of technology and services, acquired the global HVAC solutions business for residential and light commercial buildings from the Johnson Controls (NYSE:JCI)-Hitachi (TSE:6501) Air Conditioning (JCH) joint venture ($4.6 billion, 1.0x EV/Revenue). The product portfolio covers the entire spectrum of HVAC solutions for residential and light commercial buildings and includes well-known brands such as York and Coleman in the U.S. and Hitachi in Asia. In the U.S. and Europe, Bosch has forecasted more than 50% and 30% growth by the end of the decade, respectively. Overall, Bosch expects the global HVAC market to grow 40% by 2030, according to a press release.² Private strategics are expected to continue to create synergies driven by technological progress, sustainability-driven shifts, and adapting to expanding regulation.

In contrast, public buyers have waited for market volatility to settle, pulling back from capital deployments, causing M&A to drop from 10 deals in YTD 2024 to five deals to-date. Public players, like Carrier Global (NYSE:CARR), noted that in the HVAC Equipment market, the company “may encounter difficulties integrating acquired businesses with, or disposing of businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures,” according to Carrier’s 2024 annual report.³ Furthermore, Trane Technologies (NYSE:TT) stated that, “as we integrate acquisitions into our portfolio of solutions, we may face new competitors in our target markets and incur increased competition from alternative solutions,” according to the company’s 2024 10K.⁴ Alternatively, Carrier has pursued investments towards organic growth and returning capital to shareholders, notably raising its quarterly dividend 18% to continue delivering value, according to a press release.⁵ Strategic deal volume is expected to continue seesawing as private buyers deploy cash reserves through M&A activity while the public buyer environment remains bogged down by shareholder pressure for returns and market volatility.

Financial buyer activity demonstrated strength across the board in 2024, notching 32.1% YOY growth. The beginning of 2025 has been quiet but is expected to change course on the back of a robust cohort of platforms established throughout 2024. Sponsor-backed transactions normalized to 18 deals announced or closed in 2024, a slight draw down from 19 deals in 2023. This figure still shows stabilized growth, with the average number of add-on deals in the global HVAC Equipment market averaging 16.3 per year between 2018-YTD,  according to Capstone’s precedent transaction database. These financial buyers have targeted businesses with scalable growth potential for product expansion initiatives. Early capital allocation has stalled amid extended periods of elevated interest rates which has been exacerbated by elongated holding periods and limited partners (LPs) with demanding return on investment expectations. Private equity firms have targeted players in the lower middle market (<$100 million enterprise value) as they seek potential outsized returns for less upfront capital. These targets tend to serve niche end markets or develop new technologies that have the potential to penetrate growing end markets, like Data Centers. Capstone anticipates the HVAC Equipment M&A market to surpass the prior year activity after early-year hesitance and market clarity calms buyers and sellers.

Data Center Construction Trends Serve as Bellwether for Future HVAC Equipment M&A Activity

The growing Data Center Construction market is poised to be a bellwether for the HVAC Equipment sector and M&A activity, as rising demand for AI and cloud computing continues to fuel large-scale projects with intensive cooling needs. Notably, global Data Center Construction market revenue was estimated to be $240.7 billion in 2024 and is forecasted to balloon to $492.0 billion by 2034, a compound annual growth rate (CAGR) of 7.4%, according to Precedence Research.⁶ North America has led the charge with 42% ($101.1 billion) of market revenue which well positions domestic manufacturers to benefit from industry momentum. Unlike traditional commercial buildings, data centers require high efficiency cooling solutions, including air conditioning, liquid cooling, and advanced heat exchange systems. Liquid cooling systems offer superior heat dissipation compared to traditional air-cooling methods, enabling data centers to maintain optimal operating temperatures while reducing energy consumption. This demand has driven innovation in HVAC technologies and influenced pricing, production capacity, and supply chain dynamics. These trends have caught the eye of leading public strategics. Notably, Schneider Electric (ENXTPA:SU) announced its acquisition of a 75% controlling interest in Motivair for an enterprise value of $1.1 billion (October). Motivair, headquartered in New York, specializes in advanced liquid cooling technologies essential for high-performance computing and data center applications. This acquisition aligns with Schneider’s commitment to providing energy-efficient and sustainable solutions in the HVAC and Data Center markets.

In December, the Dodge Momentum Index, which measures the monthly value of nonresidential building projects going into planning, grew 19% YOY, a significant bump from the 5% growth attributed to non-data center construction, according to a press release.⁷ Sector growth will likely remain buoyed in 2025 by data center mega projects that continue to enter planning phases, bolstering construction backlogs and buoying demand for high efficiency cooling solutions for the foreseeable future. This includes two Virginia-based projects: the $1.6 billion Powerhouse 95 data center and four phases of the $1 billion Brambleton data center. In addition, ByteDance subsidiary, TikTok, has recently announced a commitment of $8.8 billion towards constructing data centers in Thailand, according to Data Center Dynamics.⁸ This follows 2024 investments toward an AI hub in Malaysia ($2.1 billion) and other considerations to expand data centers to Australia, building its current centers in Norway and Ireland. As data center investments surge, HVAC manufacturers that can meet stringent energy efficiency and sustainability requirements are likely to see sustained growth, making data center construction a leading indicator for future HVAC Equipment sector growth and M&A activity.

Private Equity Buyers Expected to Build on Prior Year HVAC Equipment Roll Ups

HVAC equipment players have presented attractive, defensible portfolio investments for financial buyers with exposure to energy efficiency trends, and strong aftermarket service opportunities. Private equity firms have continued to utilize M&A to adapt to evolving sector demands, spurring transaction activity in the near-term as firms aim to insulate and bolster platform investments via add-on acquisitions. To-date, private equity platforms have been established and have increased acquisition interest to meet this growing demand. Several notable HVAC equipment transactions are highlighted below.

• Vance Street Management Acquires Fumex (December, Undisclosed) – Private equity firm, Vance Street Capital, acquired Fumex Air Filtration Systems for an undisclosed sum in December 2024. Fumex manufactures commercial and industrial fume extraction solutions. The Fumex platform is expected to help Vance Street penetrate existing end markets and broaden its product portfolio to serve new markets while also targeting add-on M&A opportunities. The acquisition represents Vance Street’s fourth platform investment out of its Vance Street Capital IV fund, leveraging Industrial Technology sector expertise in the filtration ecosystem. Prior transactions from the fund include investments in Action Filtration (December 2024, undisclosed) and KELTEC Technolab (March 2024, undisclosed).

“Fumex has established itself as a leader in fume extraction, with products that are critical to the safety and efficiency of its customers’ operations. Vance Street is excited to partner with Fumex because of its well-regarded product offering, positive market perception and scalable operations that have enabled it to build a large and diversified install base with recurring aftermarket filter sales,” said Grady Miller, Principal at Vance Street, in a deal press release.⁹

• AirX Climate Solutions Acquires Powrmatic (December, Undisclosed) – Gryphon Investors-backed AirX Climate Solutions (ACS) acquired Powrmatic for an undisclosed sum (December 2024). Powrmatic is a specialty HVAC manufacturer of commercial and industrial heating and cooling systems. As an original equipment manufacturer (OEM) of heat exchangers, Powrmatic provides solutions saving customers upwards of 50% at a lower capital cost compared to alternative systems, according to a deal press release.¹⁰
  ACS cited Powrmatic’s Mid-Atlantic/Eastern U.S. presence as key motivation for the deal as it continues to grow its market share. The transaction is ACS’ latest foray into consolidating the HVAC Equipment space, following its acquisition of Aboveair Technologies in July 2024 (undisclosed).

“Powrmatic is highly complementary to the overall ACS portfolio. Powrmatic’s legacy, brand, and technical solutions speak for themselves in the market, and we believe when combined with ACS’ robust commercial presence in the specialty HVAC landscape, together we will be able to unlock significant growth opportunities,” noted Rick Aldridge, CEO of ACS, in the press release.

• Capstone Partners Advises Air Innovations on its Sale to Altus Capital Partners (December, Confidential) — In December, Capstone Partners advised Air Innovations, a leading manufacturer of environmental control units (ECUs), on its sale to Altus Capital Partners. Terms of the deal are confidential. Air Innovations’ products are used in high-cost-of-failure applications such as sterile storage cabinets in hospitals, clean room semiconductor lithography equipment, and payload protection for spacecrafts. The company’s Wine Guardian brand offers a wide variety of ECUs for use in homes, restaurants, and wine storage facilities that require commercial-grade temperature and humidity control. Air Innovations has a proven track record of commercializing its proprietary and customized systems to offer solutions to meet each individual customer’s specific needs. Altus Capital Partners is a private equity firm that makes control investments in middle market niche-manufacturing businesses. The deal exemplifies the firm’s focus investing in manufacturing businesses that provide a unique understanding of the opportunities and challenges faced by companies in the sector.

“We are excited to begin the next phase of our growth with Altus Capital Partners. Having a partner with their focus, scope, discipline, and ability will propel our business forward from the strong foundation we’ve created to this point,” commented Michael Wetzel, President and CEO of Air Innovations.

The tangential intersection of regulatory pressures from the DOE and European Union on sustainability and the rapid expansion of data center construction has served as a growth catalyst for the HVAC Equipment market. Advanced cooling technologies and evolving refrigerant solutions are expected to pull manufacturers toward innovation and consolidation. These shifts will likely fuel M&A activity as firms seek to acquire specialized capabilities, expand market share, and navigate tightening regulations. Equipment manufacturers that can adapt to stricter efficiency requirements while delivering high-performance cooling solutions are expected to be ripe for acquisition and deliver defensible returns.

To discuss the technology-adoption imperative, 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.

Endnotes

1. Department of Energy, “DOE Releases New Report Evaluating Increase in Electricity Demand from Data Centers,” https://www.energy.gov/articles/doe-releases-new-report-evaluating-increase-electricity-demand-data-centers, accessed March 3, 2025.

2. Bosch, “Bosch acquires residential and light commercial HVAC business from Johnson Controls and Hitachi,” https://www.bosch-presse.de/pressportal/de/en/press-release-267726.html, accessed March 25, 2025.

3. Carrier, “2024 Annual Report,” https://ir.carrier.com/static-files/1d1b2c11-aa2b-4f2c-9c2a-2f96d42b9098, accessed March 18, 2025.

4. Trane Technologies, “Form 10-K,” https://d18rn0p25nwr6d.cloudfront.net/CIK-0001466258/8de2888a-e981-4b00-8968-f17554c4e900.pdf, accessed March 18, 2025.

5. Carrier, “Carrier Board of Directors Announces an 18 Percent Increase in Quarterly Dividend to $0.225 per Share,” https://www.corporate.carrier.com/news/news-articles/202412_carrier-board-directors-announces-18-percent-increase-quarterly-dividend-0225-per-share.html, accessed March 6, 2025.

6. Precedence Research, “Data Center Construction Market Size, Share, and Trends 2025 to 2034,” https://www.precedenceresearch.com/data-center-construction-market, accessed March 5, 2025.

7. Construction Dive, “Multibillion-dollar data center projects to watch,” https://www.constructiondive.com/news/data-center-projects-construction-2025/738160/, accessed March 5, 2025.

8. Data Centre Dynamics, “TikTok commits $8.8bn to data centers in Thailand,” https://www.datacenterdynamics.com/en/news/tiktok-commits-88bn-to-data-centers-in-thailand/, accessed March 3, 2025.

9. Vance Street Capital, “Vance Street Capital Partners with Fumex,” https://vancestreetcapital.com/news/2024/12/vance-street-capital-partners-with-fumex/, accessed March 3, 2025.

10. PR Newswire, “AirX Climate Solutions Acquires Powrmatic USA,” https://www.prnewswire.com/news-releases/airx-climate-solutions-acquires-powrmatic-usa-302322615.html, accessed March 3, 2025.