Coffey’s Corner – June 2021
Mergers & Acquisitions: The Key to Our Future
Greetings, everyone! It’s getting hot outside, and Father’s Day is just around the corner. That means it must be the start of another busy season!! Please stay safe out there. Long days in the heat can cause fatigue, so keep yourself hydrated, get enough sleep, and always be vigilant about safety. More than anything, we want you to make it home to your family at the end of each day’s work.
This month, I want to have a brief conversation about mergers and acquisitions (M&A). Why does CoolSys buy other companies and seek to expand our business?
In general, companies are never static. They are either treading water, shrinking or expanding. Growth is the propulsion that drives a company forward, like a propeller on a ship. When a company is not growing, it’s like a ship with a dead engine: The company may “float in calm seas,” but an economic storm can cause it to falter and fail. We saw this in our industry last year when Artic Mechanical faltered, went bankrupt and ceased operations. In short, growth is the life’s blood of a company.
Opportunities for Growth
Our goal and objective are to make CoolSys an employee-centered business that is the employer of choice in a labor-constrained industry and the provider of choice for its thousands of customers. What does that mean?
- There is a global labor shortage in all trades-based businesses. Not enough people are choosing the trades after high school. In the U.S., there are not enough plumbers, electricians, pilots — and HVAC and HVAC/R workers — to handle an increasing demand. Growing our technician base adds capacity. When CoolSys buys companies, we add to our technician base, extend our geographic footprint, increase strategic capability in new customer verticals and markets, and so forth.
- When there is a shortage of labor in a constrained market, companies that have more capacity win larger contracts, while others lose opportunities. We saw this when Amazon bought Whole Foods. At the time, Whole Foods had 200 HVAC/R vendors servicing 457 stores. On average, each vendor serviced a few stores; most were small, local companies. When Amazon came in, it immediately put out an RFP (request for proposal) to only 10 companies. Those 10 companies displaced 190 other mom-and-pop shops that may have been doing an excellent job but were not big enough to warrant consideration to continue as a vendor. Ten vendors are easier to manage than 200. In this case, CoolSys was a big winner, and 190 mom-and-pops were, unfortunately, not. Big commercial companies such as Target and Starbucks need big vendors to solve big problems over a broad geography.
- CoolSys is the largest HVAC/R engineering, install, service and energy optimization services company in the U.S. No one else is even close. There is strength — and opportunity — in numbers.
Where We’re Headed
We estimate there are currently 4,500 companies in the commercial HVAC/R space in the U.S. Several of those will be sold in the years to come as owners age out of the workforce. CoolSys has bought 20 companies, and over the next three to four years, we will buy 20 more. Our workforce will grow to include about 6,000 employees, and we will become the one-stop shop for large customers who need to solve complex problems in thousands of locations across North America.
CoolSys will also be the king of specialty cooling projects. Already, we have built three of the four largest transcritical CO2 industrial projects over 100,000 square feet in the U.S. When the U.S. Navy needed the HVAC/R reoutfitted on the hospital ship Comfort, they called us. When a telecommunication company needs thousands of cell phone towers serviced, they come to us. Universities turn to us to build their laboratories, and pharmaceutical companies rely on us to build their research facilities.
All for You
Acquisitions at CoolSys are funded with a separate checkbook that has nothing to do with business operations. The money we use to buy companies is not the same money we use to buy trucks, send people to training classes, pay bills, and so forth. We have institutional shareholders who believe in our story and help fuel our growth. One day, CoolSys will be a public company — and you can own a part of it.
As a guy who started his post-military career by driving a truck, doing both service and install work, I recognize that the real magic of our company is YOU. I want to build a company that people are proud to be a part of — a place that creates opportunity for those who seek it and has a sustainable future as the dominant provider of HVAC/R in North America.
M&A is a key piece of the strategy at this point in the evolution of our company. Growth is messy, and it is hard at times. Our commitment to you, when the work is done, is to be the best place to work and the best provider of all things to our customers. Employer of choice, vendor of choice.
If you have a question about anything I’ve brought up here, please drop me a line at email@example.com. Thank you for all you do to make CoolSys the best place to work. Stay cool this summer — and stay safe!