The North American HVAC market is poised for continued growth, with an expected low to mid-single-digit CAGR through 2030, driven by key segments such as commercial and residential. Data centers are projected to lead growth, with a 10-12% CAGR (2024-2030), fueled by rising demand for AI and data storage, alongside the critical need for advanced cooling systems to optimize GPU performance. Multifamily and industrial segments are also expected to grow steadily, supported by increasing demand for smart HVAC systems with built-in automation and a focus on reducing energy costs and carbon emissions through new technologies like heat pumps.
Several macro trends are driving the underlying market growth, including the adoption of new refrigerants and cooling systems, advances in product technologies (e.g., heat pumps), PE roll-ups, the rise of smart HVAC systems and IoT integration, aging infrastructure, and urbanization and population growth. These trends vary in their scale and breadth of impact across different segments. For example, the shift to new refrigerants and cooling technologies is becoming more significant due to EPA requirements mandating that manufacturers use refrigerants with a global warming potential (GWP) of 700 or less by 2025. Additionally, new products such as heat pumps are driving system replacements, as end-users seek to reduce their carbon footprint and energy consumption by adopting more energy-efficient technologies.
Alongside these emerging trends, there has been a surge in middle-market M&A activity in the HVAC contractor space. From 2014 to 2022, the number of acquisitions nearly tripled, rising from 30 to 298 annually. This increase has been fueled by growing PE activity and interest from notable firms such as Alpine Investors, Genstar, and Madison Dearborn Partners. PE firms have pursued roll-up strategies with “platform” companies, capitalizing on the highly fragmented contractor market, where no single firm dominates. These roll-ups enable PE firms to quickly consolidate smaller contractors and build leading players, either nationally or regionally. By implementing this strategy, PE firms can potentially extract higher margins and achieve greater efficiency through increased standardization and the establishment of partner networks across their portfolio companies.
