Happy Tuesday, everybody!
Yesterday, our team had its first official happy hour. With bars packed all around us, it felt like New Yorkers want to make the most of this summer! But for a large number of private equity players, it seems like summertime has equated to making an HVAC investment.
I’ve covered multiple HVAC PE deals in the past few months, but Partners Group’s announced acquisition of Reedy Industries is arguably the most notable – at least in terms of scale.
Deerfield, Illinois-headquartered Reedy – one of the largest service providers in the US – has been aggressively growing. Just yesterday, Reedy announced its 15th add-on acquisition since it was bought by seller Audax Private Equity in 2019.
Partners Group will now join an ever-growing list of PE firms building out national HVAC platforms. The Reedy family, management and Audax are set to remain minority investors.
Early last month, Morgan Stanley Capital Partners capitalized on the growing opportunity and backed Sila Heating & Air Conditioning. With the transaction, exiting investor Dubin Clark generated a 250 percent IRR and over 5x return in under two years, a source told PE Hub. Sila is a collection of seven HVAC service providers poised to post more than $100 million in revenue this year, another source said.
In the same month, Gryphon Investors-backed HVAC contractor Right Time made its seventh acquisition in Comfort Masters, an Ontario-based provider of residential HVAC, air quality, and hot water services.
While PE firms have been backing HVAC companies for years, the high level of deal activity this year can be attributed to covid. Mike Sexton, senior investment leader, private equity services, Partners Group, adds: “The maintenance and repair of commercial HVAC equipment has become an increasingly important theme since the COVID-19 pandemic, due to the heightened focus on indoor air quality and the effort to maintain facility environments that are healthy, energy-efficient and cost-effective.”
For Audax, Reedy is its second HVAC exit since 2019, when Ares Management bought CoolSys, a collection of HVAC services companies.
Podcast alert: While we are all noting the rush of capital into the private equity industry, I don’t see enough talk about risks that come along with that. Buyouts’ Chris Witkowsky sat down (virtually) with Igor Rozenblit, former co-head of the SEC’s private funds unit, to talk about the biggest regulatory risks facing PE firms today, including the proliferation of new products and the compliance and disclosure issues that go along with that growth.
“Every time there’s a new product that could interact with an old product there are compliance issues that need to be thought through,” he said in the podcast. “At the fund formation disclosure of information is pretty good, it’s what happens after the fund formation.”
That’s it for me! Have a great week ahead everyone, and as always, hit me up at firstname.lastname@example.org with any feedback, tips or just to say hello!