Capstone Headwaters Reports: Private Equity Keeps Buy-And-Build Playbook Open

October 1, 2020

Boston, MA – Capstone Headwaters released its Heating, Ventilation, Air Conditioning, and Refrigeration (HVACR) Services Update today, reporting that merger and acquisition (M&A) activity in Q1 2020 outpaced 2019 activity by 36.7%, followed by a sharp reduction in deal volume in Q2. The abrupt slowdown in deal making in Q2, driven by coronavirus-induced uncertainty, has resulted in a 10.3% decline in transaction volume year-over-year through August. The swiftness of COVID-19’s disruption forced buyers to shift focus on internal business disruptions while sellers put their exits on the shelf, awaiting a recovery in performance to further pursue an M&A transaction. As the economy reopens and the financial and operational impacts become more transparent, buyers and sellers are returning to the table, evidenced by the strong uptick in deal activity in July. 

“The year-over-year declines in M&A activity in this sector mask the significant commitment that has been made to the HVACR services market by the Private Equity community over the past few years. The ability to geographically consolidate services in this market, and to do so by rationalizing overhead costs of the combined companies and acquiring add-on businesses at accretive purchase multiples is nirvana for financial sponsors and is a phenomenon that should continue for years to come,” commented Ted Polk, Managing Director at Capstone Headwaters.

Through August, private equity (PE) buyers composed 32.1% of deal activity while strategics accounted for 67.9%. Notably, PE add-on acquisitions amounted to 29.5% of transactions, reflecting continued demand to pursue buy-and-build strategies to stimulate growth, despite an extremely challenging economic climate.  The highly fragmented HVACR Services market presents ample consolidation potential, with an extensive supply of small, geographic-centric prospective add-ons. Capstone maintains relationships with an extensive private equity network, which gives us a unique pulse on buyer perspectives and insights in the HVACR industry. In this report, CEO AJ Brown of Alpine Investors-backed Apex Service Partners, and VP of Corporate Development Karan Aggarwal of Ares Management-backed CoolSys, provided Capstone with their perspectives and outlooks on the attractiveness of the HVACR Services market. 

In addition, the report provides an insightful case study on its most recent advised sale of Rogers Mechanical to Craft Work Capital, LLC, a joint venture between Aterian Investment Partners and certain members of LS Power Group.

To access the full HVACR Services report, click here

Capstone Headwaters is one of the largest and most active independent investment banking firms in the United States.  The firm has a rich 15+ year history of achieving extraordinary results for middle market entrepreneurs, business owners, investors, and creditors.  Capstone offers a fully integrated suite of corporate finance services, including merger & acquisition, debt & equity placement, corporate restructuring, valuation & fairness opinion, financial advisory, and ESOP advisory services.  Headquartered in Boston, the firm has 150+ professionals across 16 offices in the U.S., with and an international presence including over 450 professionals in 40 countries. With 16 dedicated industry groups, the firm delivers sector-specific expertise through large, cross-functional teams on a global basis.  Capstone has been named “U.S. Middle Market Investment Bank of the Year” for the past 9 consecutive years and is consistently recognized as one of the top investment banking firms to work for. For more information, visit

For More Information Contact the Key Report Contributors:

Ted Polk
Managing Director

Lisa Tolliver
Senior Director