How to Spot a Private-Equity-Owned AC Company
Your local AC company might not be as local as you think.
There’s been a bit of a shopping spree happening in the HVAC industry.
Large companies and private-equity groups have been buying heating and air conditioning companies across Florida and the rest of the country.
And here’s the interesting part:
They usually don’t change the name.
Why would they?
If a local AC company has spent 20, 30, or 40 years building a good reputation in your community, changing the name would defeat half the purpose of buying it.
So the trucks may look the same.
The logo may look the same.
The commercials may still talk about serving the community for 40 years.
The founder might even still be smiling at you from the side of the van.
But the company behind all of that may be very different.
Welcome to modern HVAC.
First: What Is Private Equity?
We’ll keep this simple because this is AC University, not Wharton.
A private-equity firm raises money to buy businesses.
Those businesses are typically purchased with the goal of growing revenue, increasing profitability, combining operations, and eventually producing a return for the owners.
HVAC has become particularly attractive because everybody needs air conditioning.
Especially in Florida.
Your AC doesn’t care about interest rates, the stock market, or whether you were planning on spending money this month.
When it’s 94 degrees outside and your house is 84 degrees inside, you’re calling somebody.
That makes HVAC companies pretty attractive businesses to own.
And it has resulted in a lot of acquisitions.
But My AC Company Is Still Locally Operated
It might be.
This is where things get interesting.
When companies are acquired, you don’t necessarily wake up Monday morning to find GLOBAL MEGA AIR CONDITIONING CORPORATION™ parked in your driveway.
The local brand often stays.
Sometimes the employees stay.
Sometimes the original owner stays for a while.
The website stays.
The phone number stays.
The trucks stay.
That isn’t necessarily deceptive. There are legitimate reasons to preserve an established brand.
But it does mean that the name on the truck doesn’t always tell you who owns the company anymore.
So how can you tell?
Sign #1: They “Joined a Family”
Apparently nobody sells HVAC companies anymore.
They join families.
You may see announcements saying things like:
“XYZ Air Conditioning has joined the ABC family of companies.”
Or:
“We’re excited to announce a strategic partnership.”
Or:
“XYZ Air Conditioning has partnered with a leading home-services platform.”
Maybe they did.
Maybe somebody also received a very large check.
Both things can be true.
If you’ve used the same company for years and suddenly see language about a new “partnership,” it might be worth spending five minutes figuring out exactly what happened.
Search the company name along with words like:
acquired
acquisition
private equity
portfolio company
backed by
partnered with
You might be surprised what you find.
Sign #2: The Founder Is Still Everywhere
This is actually pretty smart.
Imagine buying a company whose founder spent 30 years becoming a trusted name in town.
Would you immediately remove him from everything?
Of course not.
That’s part of what you bought.
The founder may remain involved after an acquisition. Sometimes that’s part of the agreement. Sometimes the founder genuinely continues running parts of the operation.
But there’s an important distinction:
Being involved with a company isn’t the same thing as owning it.
That smiling guy you’ve seen on television for the last 15 years might still be in the commercial.
That doesn’t necessarily mean it’s still his company.
Sign #3: Your Technician Seems Weirdly Interested in Your Financial Situation
Your capacitor failed.
Somehow we’re discussing financing.
Interesting.
A technician should absolutely explain your options when something goes wrong.
Sometimes repair doesn’t make sense.
Sometimes replacement really is the smarter decision.
We recommend replacement too.
But there’s a difference between:
“Here’s what failed, here’s what it costs to repair it, and here’s what I’d recommend.”
and:
“Before we talk about that capacitor, what kind of monthly payment would you be comfortable with?”
One is an HVAC conversation.
The other is starting to sound suspiciously like a car dealership.
Sign #4: Every Service Call Has Three Options
The Good Option.
The Better Option.
The Best Option.
Maybe even the Platinum Ultimate Indoor Air Quality Comfort Experience™.
That’ll be $14,782.
Financing available.
Giving customers options isn’t bad. We give customers options all the time.
The question is whether those options solve an actual problem.
If your blower motor failed, you probably need a blower motor.
You don’t necessarily need a blower motor, UV light, surge protector, air purifier, maintenance membership, duct cleaning and a partridge in a pear tree.
Ask what you actually need.
It’s an incredibly effective question.
Sign #5: Your Nine-Year-Old Air Conditioner Has Apparently Died of Old Age
This one is near and dear to our hearts.
We hear some version of this constantly:
“They said it’s old.”
Okay.
What’s wrong with it?
“Well…it’s old.”
Yes.
We established that.
What’s wrong with it?
Age matters when evaluating equipment. Parts availability matters. Refrigerant matters. Coil condition matters. Compressor condition matters. Repair history matters. Efficiency matters.
But the number on the manufacturing date isn’t a diagnostic measurement.
We’ve worked on plenty of older systems that were operating perfectly well.
We’ve also condemned relatively young systems that had legitimate major failures.
The equipment doesn’t get a Social Security check when it turns ten.
Diagnose the machine.
Sign #6: Nobody Wants to Talk About the Actual Repair
This is one of the easiest ways to evaluate a replacement recommendation.
Ask:
“Can this be repaired?”
Not:
“Would you replace it?”
Not:
“Is it worth fixing?”
Those questions involve opinions.
Ask whether it can be repaired.
Then ask:
“What exactly failed?”
Then:
“How much would the repair cost?”
Now you have information.
Maybe the compressor failed on a 17-year-old system with a leaking evaporator coil.
Okay.
We’re probably going to have a replacement conversation.
But maybe it needs a $300 electrical repair.
That’s a slightly different conversation.
Context matters.
Sign #7: Everything Is About the Monthly Payment
This is another favorite.
“Good news! We can get you into a brand-new system for only $189 a month!”
Wonderful.
For how many months?
At what interest rate?
What’s the total amount financed?
What is the actual price of the air conditioner?
Monthly-payment selling makes large purchases feel smaller.
That’s why car dealerships do it.
There’s nothing wrong with financing an HVAC system. Sometimes financing is exactly what allows a homeowner to replace a failed system.
Just don’t confuse an affordable monthly payment with an inexpensive air conditioner.
Ask for the actual price.
Always.
Sign #8: You Can’t Figure Out Who Actually Owns the Company
Try it sometime.
Go to the company’s website.
Look at the About page.
Then search the company name.
Search the owner’s name.
Search for acquisition announcements.
Sometimes ownership is extremely clear.
Sometimes you need a corkboard, red string and three cups of coffee.
That doesn’t automatically mean anything sinister is happening.
Corporate ownership structures can simply be complicated.
But if “locally owned” matters to you, there’s nothing wrong with asking:
“Who owns this company?”
That’s a perfectly reasonable question.
Now for the Important Part
A private-equity-owned AC company is not automatically a bad AC company.
Seriously.
There are excellent technicians working for large HVAC companies.
There are terrible technicians working for small HVAC companies.
There are honest salespeople.
There are dishonest owners.
There are great family businesses.
There are family businesses we wouldn’t let change a thermostat battery.
The ownership structure alone doesn’t tell you whether someone is going to do good work.
What matters to us is incentive and transparency.
Homeowners should know who they’re doing business with.
And homeowners should understand whether the person evaluating their equipment is primarily being rewarded for accurately diagnosing it or for generating revenue from the call.
Those incentives can affect recommendations.
Ask Your Technician One Awkward Question
Here’s a fun one.
Ask:
“Do you make commission on what I buy today?”
That’s it.
You’re allowed to ask.
Maybe the answer is no.
Maybe the answer is yes.
Commission doesn’t automatically make someone’s recommendation dishonest either.
But wouldn’t you like to know?
If someone recommending that you spend $15,000 receives more money if you spend $15,000, that’s useful information to have while making your decision.
Five Questions to Ask Before Replacing Your AC
If someone tells you that you need a new air conditioner, ask these five questions:
- What exactly failed?
- Can the existing system be repaired?
- What would the repair cost?
- Can you show me the failed component, measurement or condition that led to your recommendation?
- Are you financially incentivized based on what I purchase today?
A competent HVAC professional should be able to answer those questions without becoming defensive.
And if they can’t?
Well.
That’s information too.
Sometimes You Really Do Need a New AC
We should probably make this clear before somebody accuses us of believing air conditioners live forever.
They don’t.
Eventually compressors fail.
Coils leak.
Parts become unavailable.
Repair costs stop making sense.
And sometimes the smartest thing you can do is stop putting money into an old system and replace it.
We’ve told plenty of customers exactly that.
But here’s our philosophy:
Replacement should be the conclusion of the diagnosis.
It shouldn’t be the goal of the service call.
There’s a big difference.
That’s Why We Offer Free Second Opinions
We’ve inspected systems after homeowners were told they needed replacement.
Sometimes we agreed.
Sometimes we didn’t.
We’ve found systems that could still be responsibly repaired.
We’ve found systems that simply needed maintenance.
We’ve found problems that weren’t nearly as catastrophic as the homeowner had been led to believe.
And yes, we’ve also walked into houses hoping to save an old system and had to tell the homeowner:
“Yeah…they were right.”
That’s the job.
We’re not emotionally attached to whether you repair your system or replace it.
We want you to have accurate information so you can make the decision.
So if another company tells you your AC needs to be replaced, especially after what was supposed to be a routine service call, get a second opinion.
From us.
From another local contractor.
From whoever you trust.
Just get one before signing a five-figure contract at the kitchen table because somebody told you the system is “old.”
Your air conditioner might actually be dead.
But we think somebody should diagnose it before holding the funeral.