Follow the Private Equity Money: Why HVAC and Plumbing Are the Smartest Investments Right Now

When it comes to private equity, the buzz is often around tech startups, SaaS companies, or flashy consumer brands. But in 2024, the smartest money is flowing into a less glamorous but incredibly lucrative space: HVAC (heating, ventilation, and air conditioning) and plumbing.

This sector, part of what we call the “real economy” is rapidly becoming a hotbed for private equity activity. PE firms are buying up HVAC and plumbing businesses at an unprecedented pace, and for good reason. These industries aren’t just resilient; they’re essential. If you’re an investor, now is the time to follow the money and pay attention to this booming market.

Why HVAC and Plumbing Are Thriving

1. Recession-Proof Demand

HVAC and plumbing are necessities, not luxuries. Whether it’s repairing a burst pipe or replacing a broken furnace in the dead of winter, these services are indispensable. Even in economic downturns, people prioritize their heating, cooling, and water systems. This makes these businesses resilient to market fluctuations, a critical factor for PE firms seeking stable returns.

2. Aging Infrastructure

Across the U.S., aging homes and commercial buildings are driving the need for upgrades and repairs. HVAC systems typically last 10-15 years, and plumbing systems often need significant maintenance or replacement as they age. This steady demand creates a reliable revenue stream, which is a magnet for investors.

3. Labor Shortages and Rising Value of Tradespeople

The skilled labor shortage in trades like HVAC and plumbing is creating a bottleneck in supply. But here’s the twist: this shortage has elevated the value of tradespeople to unprecedented levels. The individuals who opted to pursue trades over college degrees are now primed to win big. As society grapples with a dwindling number of skilled workers, tradespeople have become some of the most essential and well-compensated professionals in the workforce.

Private equity firms are seizing this moment, acquiring businesses with experienced technicians and building pipelines for developing more talent. This is not just about investments in companies, it’s an investment in the workforce that powers them.

4. Recurring Revenue Models

Many HVAC and plumbing businesses have transitioned to subscription-based models, offering maintenance plans that provide steady, predictable income. These recurring revenue streams are highly attractive to investors, as they offer stability and long-term profitability.

5. Sustainability and Regulation

With rising energy costs and increasing environmental regulations, there’s growing demand for energy-efficient HVAC systems and sustainable plumbing solutions. This trend isn’t going away, and it’s opening up new revenue streams for companies that can innovate and adapt.

The Rise of the Real Economy

While college degrees have historically been seen as the pathway to financial success, the tide is shifting. The “real economy,” driven by skilled trades like HVAC and plumbing, is proving to be one of the most reliable engines of wealth creation. Private equity firms have recognized this and are pouring billions into consolidating and scaling businesses in this space.

For tradespeople, this is a golden era. The scarcity of skilled labor means their expertise is in high demand, giving them significant earning potential. Meanwhile, entrepreneurs who have built HVAC and plumbing companies are cashing in as PE firms compete to acquire their businesses.

Private Equity Moves in HVAC and Plumbing

Private equity firms like Gryphon Investors, Alpine Investors, and The Riverside Company are actively acquiring HVAC and plumbing businesses, seeking to consolidate and scale these traditionally fragmented industries. These deals are creating regional powerhouses that dominate local markets while benefiting from operational efficiencies.

For example:

Gryphon Investors recently acquired multiple HVAC companies in the Southeast, creating a platform for rapid regional expansion.

The Riverside Company invested in one of the largest plumbing businesses in the Midwest, citing strong recurring revenue and growing demand for sustainable solutions.

Alpine Investors has targeted smaller HVAC businesses with robust customer loyalty, using their proprietary talent program to scale operations efficiently.

Why Investors Should Be Paying Attention

Private equity’s focus on HVAC and plumbing isn’t random, it’s strategic. These businesses check every box that PE firms look for: steady cash flow, growth potential, and the ability to scale. But what’s even more compelling is that this sector is still flying under the radar for many investors.

If you’re looking for opportunities with real staying power, this is it. HVAC and plumbing represent the backbone of the real economy. They aren’t trendy, but they’re essential, and that’s where the smartest investments are made.

What’s Next for the Industry

The consolidation trend will likely continue as PE firms aim to create regional and national leaders in the HVAC and plumbing space. Companies that embrace technology, such as AI-driven diagnostics, IoT-enabled systems, and advanced energy-efficient solutions, will emerge as winners in this evolving market.

Additionally, workforce development will play a critical role. Companies and PE firms will need to invest in training programs to attract and retain the next generation of tradespeople, ensuring the long-term sustainability of this booming sector.

Lastly?

The best investors know how to follow the money. Private equity firms have already recognized the potential in HVAC and plumbing. They’re pouring billions into these industries, not because they’re glamorous, but because they’re profitable, stable, and essential.

And for the individuals who chose trades over college, the rewards are clear: they’re becoming indispensable players in a thriving, high-demand field.

If you’re an investor looking for opportunities with lasting impact, it’s time to take a closer look at the real economy. Follow the private equity money, it’s leading straight to HVAC and plumbing.

Corey J

Qwerkz