HVAC Industry: Strategic Divestitures and Acquisitions

Recent Major Acquisitions

Trane Technologies and Carrier Global Corporation have made significant acquisitions recently. Trane integrated MTA S.p.A, Helmer Scientific, and Nuvolo Technologies, enhancing global operations. Carrier completed a major acquisition on January 2, 2024, boosting net sales by 17% in Q2 2024.

"And I'll tell you some of our recent acquisitions, it's spot on with taking the learnings of the businesses we've acquired, bring them into the Trane family and how do we replicate that across 40, 50 plants across the globe." --- (TT, earning call, 2024/Q1)

"The acquisition was completed on January 2, 2024. As a result, the assets, liabilities and results of operations of the VCS Business are consolidated in the accompanying Unaudited Condensed Consolidated Financial Statements as of the date of acquisition and reported within our HVAC segment. Portfolio Transformation" --- (CARR, sec filing, 2024/Q2)

"The increase in revenue from acquisitions includes MTA S.p.A (MTA) and Helmer Scientific Inc (Helmer) which were acquired in May 2023, and Nuvolo Technologies Corporation (Nuvolo) which was acquired in November 2023." --- (TT, sec filing, 2024/Q1)

"The transaction added 17% to Net sales during the three months ended June 30, 2024 and is included in Acquisitions and divestitures, net." --- (CARR, sec filing, 2024/Q2)

"So some of the acquisitions you mentioned, Andrew, I'll even go back to ALCO in 2022, Think of like ALCO and MTA, both acquisitions supporting our EMEA business." --- (TT, conference, 2024/05/15)

Recent Divestitures

Johnson Controls and Carrier have recently executed significant divestitures, with JCI selling its Residential and Light Commercial HVAC business to Bosch for $8.1 billion and Carrier completing the Access Solutions divestiture. These moves aim to optimize shareholder value and streamline operations, despite potential risks and challenges.

"What I'll tell you is that there is different combination of divestiture structure that we’re looking at and we are simply trying to optimize shareholder value and our ability to return a very large portion of that the proceeds associated with the divestiture back to shareholders." --- (JCI, earning call, 2024/Q2)

"Our divestitures remain very much on track and we are deploying the proceeds as committed. Our first three exits will yield over $7 billion in gross proceeds." --- (CARR, earning call, 2024/Q2)

"include, among others, risks related to the ability to realize the anticipated benefits of the divestiture, including the possibility that expected benefits of portfolio simplification will not be realized or will not be realized within the expected time frame; delays in the closing of the transaction due to regulatory approvals or other closing conditions; unfavorable reaction to the divestiture by customers, competitors, suppliers and employees, disruption from the transaction, making it more difficult to maintain business and operational relationships; significant transaction costs; and other unknown liabilities." --- (JCI, press release, 2024/07/23)

"Acquisitions and divestitures, net primarily relates to the Access Solutions divestiture completed on June 2, 2024." --- (CARR, sec filing, 2024/Q2)

"Divestiture Advances Johnson Controls' Transformation into a Pure-Play Provider of Comprehensive Solutions for Commercial Buildings Transaction Valued At $8.1 Billion; JCI Consideration of $6.7 Billion Company Provides Preliminary 2024 Third Fiscal Quarter Earnings Update CORK, Ireland, July 23, 2024 /PRNewswire/ -- Johnson Controls International plc (NYSE:JCI) ('Johnson Controls' or the 'Company'), the global leader in smart, healthy, safe and sustainable buildings, today announced it has reached a definitive agreement to sell its Residential and Light Commercial (R&LC) HVAC business in an all-cash transaction to the Bosch Group ('Bosch')." --- (JCI, press release, 2024/07/23)

Impact on Market Positioning

Strategic divestitures and acquisitions have bolstered market positioning for key HVAC players. Johnson Controls leverages technology deployment and differentiation, Carrier capitalizes on secular trends and brand strength, AAON aims for best-in-class status, and Trane Technologies benefits from a diversified portfolio and strong execution.

"What I would tell you, market back, we know where the opportunities are -- how we are positioning, how we are deploying each of our technologies and differentiating the solutions we go-to-market." --- (JCI, earning call, 2024/Q2)

"We believe that our business segments are well positioned to benefit from favorable secular trends, including these mega-trends and from the strength of our industry-leading brands and track record of innovation." --- (CARR, sec filing, 2024/Q2)

"From my point of view, considering our success in this market to date, we are positioned to be the Best in class provider for this market." --- (AAON, earning call, 2024/Q1)

"We have a diversified transport business globally, with opportunities to grow across the portfolio, with leading innovation, strong execution through our business operating system and a world-class dealer network, we're well positioned to outperform in any market environment." --- (TT, earning call, 2024/Q1)

"Kind of 2025, should we expect there to be a strong bounce in that the quality the quality of the pipeline that the team has been able to rebuild on the back end of having a leading position and being probably more exposed than most towards the large construction aspect of that market." --- (JCI, conference, 2024/05/21)

Future Growth Prospects

Johnson Controls and Trane Technologies express optimism about future growth, citing opportunities in fast-growing verticals and significant revenue increases. Carrier Global Corporation anticipates margin expansion, albeit modestly, while Johnson Controls highlights the need for improved service growth to meet high-end guidance.

"We remain excited about the opportunities in this fast-growing vertical and look forward to updating you on our progress in the future." --- (JCI, earning call, 2024/Q2)

"And then by the fourth quarter of last year, the growth was mid-20s. So think of that as a 10-point increase in terms of growth and revenue throughout last year." --- (TT, earning call, 2024/Q1)

"The margin expansion in future quarters will be there, but it won't be there at the same extent because for the overall company, we're targeting about 100 bps of margin expansion." --- (CARR, conference, 2024/05/21)

"And finally to achieve the very high-end of that guidance, we would have to achieve improved service growth on where we closed the second quarter and where we see the third quarter lending." --- (JCI, earning call, 2024/Q2)

Integration Challenges and Successes

Carrier's ability to accelerate restructuring at Viessmann and Johnson Controls' substantial investments to strengthen leadership highlight both challenges and successes in integrating acquisitions. Carrier's Riello brand's professional integration of refugees further underscores their capability in managing integration processes effectively.

"Andrew Obin: Thank you, Patrick. And just a follow-up on Viessmann. What's your ability if for whatever reason, second half orders do not pick up as you expected, what's your ability to accelerate restructuring at Viessmann?" --- (CARR, earning call, 2024/Q1)

"Our goal is to expand the business and partner with leadership to make substantial commercial and operational investments to strengthen the company's leadership position and better serve their customers." --- (JCI, press release, 2024/06/18)

"A moment of pride for Carrier's Riello brand in Italy. For the second year in a row, the UNHCR acknowledged efforts towards integrating refugees professionally, honoring Riello with the "Welcome." --- (CARR, Twitter post, 2024/07/16)