HVAC/R M&A Update (January 2017)

Seale &Associates

Business Insights

Global HVAC/R Industry: Trends and M&A Update

January 2017© Seale & Associates, Inc., 2017

30.0

8.7 8.1

5.1 5.1 4.74.3 3.1 0.9

56%

28%

100%

13% 15%

78%

7% 10%

99%

0%

20%

40%

60%

80%

100%

0

5

10

15

20

25

30

China Asia (excl.China,Japan,

and India)

Japan Central &South

America

NorthAmerica

Europe MiddleEast,Africa

India Oceania

Units Sold (in millions) Penetration Rate

Single-Family Homes

28%

Apartment6%

Healthcare & Institutional

13%Education13%

Manufacturing & Industrial

11%

Office10%

Other19%

$15$12

$37

$4 $5 $4

$19

$12

$53

$5 $6 $6

$23

$14

$65

$6 $7 $8

$0

$10

$20

$30

$40

$50

$60

$70

North America WesternEurope

Asia/Pacific Central &South America

EasternEurope

Africa/Mideast

2010 2015 2020

Global HVAC/R Demand by End Market, 2015(% Market Share)

Air Conditioning Systems Market Revenue - Asia Pacific (in USD billions)A rising middle-income group in emerging countries has

fueled a double-digit construction boom for buildings andhouses. Alongside improving living standards and growingconsumer demand, the growth in the HVAC/R market,especially air conditioning, is expected to further accelerate.

By revenue, Asia Pacific is projected to dominate the globalmarket for air conditioning systems with a forecasted marketshare of 55% in 2024. The key factors for this growth are agrowing urban population, increase in disposable income, andvarying climatic conditions.

In 2015, air conditioning was responsible for approximately5% of global electricity consumption.

Industry Trends

The global HVAC/R equipment market, which was valued at $77.2 billion in 2015, is expected to grow 4.1% annually from 2015 to 2020to a value of $122.1 billion. Equipment includes room air conditioners, unitary air conditioners, heat pumps, boilers, warm air furnaces,and refrigerators. Sales of room air conditioners and heat pumps are expected to drive much of the growth. The residential market willoutpace the currently dominant nonresidential (commercial and industrial) segment. Increased construction activities, growingreplacement demand in developed countries, rising need for energy efficient HVAC/R systems, and developing infrastructure in emergingeconomies will be the key driving factors for the industry.

Global HVAC/R Industry Overview

2

Global HVAC/R Demand by Geography(in USD billions)

Emerging Economies

Environmental awareness continues to grow in developedcountries, leading to a higher demand for energy-savingHVAC/R technologies. Most notable is the growth seen ininverter air conditioners, which lower energy consumption by30%, and heat pumps, which reduce CO2 emissions by 60%compared to fossil fuel-burning heaters that use oil or gas.

Although inverter air conditioners have a 100% penetrationrate in Japan, the rate is still low in the rest of the world; forexample, in North America, the rate is only about 15%.

Developed Countries

$61

$74

$90

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2015 2020 2024

3.9% CAGR

5.1% CAGR

Global Residential Inverter Air Conditioning Demand, 2015

(%)

Business InsightsJanuary 2017

NM = Not Meaningful

Public Comparable Companies – Enterprise Value > $1 Billion

Public Comparable Companies – Enterprise Value < $1 Billion

3Business InsightsJanuary 2017

NM = Not Meaningful

Nov-16 Kwikot Limited ZAFWater heating systems, solar collector panels, heat pumps, control valves, water tanks, water purification filters, sinks, bowls, and other appliances

Residential & Commercial AB Electrolux (publ) $229 - 2.8x

Nov-16 PVI Industries, LLC USA Water heaters, hot water storage tanks, and water heater controls Residential & Commercial Watts Regulator Company $78 11.0x 1.6x

Aug-16 Nortek Inc. - 93% USARange hoods, exhaust fans, air exchangers, ventilators, central vacuum systems, rooftop cooling and heating systems, and others

Residential, Commercial, & Industrial Melrose Industries PLC $2,673 9.9x 1.1x

Jul-16 LSB Industries (climate control business) USA Water source and geothermal heat pumps, and air handling products Residential & Commercial NIBE Industrier AB $364 11.4x 1.3x

Jun-16 United Refrigeration Industries Pvt. Limited PAKRefrigerators, freezers, air conditioners, washing machines, microwave ovens, and related parts and accessories

Residential Arçelik Anonim Sirketi $243 5.4x 1.1x

Jun-16 Haier US Appliance Solutions, Inc. USA Refrigerators, air conditioners, water heaters, and other home appliances Residential Qingdao Haier Co., Ltd. $5,400 10.0x -

May-16 Aupu Group Holding Company Limited - 45% CHNVentilation fans, water heaters, integrated ceiling solutions, downdraft range hoods, and kitchen cabinets

Residential Crista Universal Company Limited $163 8.0x 2.0x

May-16 Service Experts LLC USA HVAC and plumbing equipment and services Residential & Commercial EnerCare Solutions Inc. $341 - 0.8x

Apr-16 Flanders Holdings LLC USAAir filters for industrial cleanrooms, such as those in the fields of pharmaceuticals and food processing, and commercial and residential use

Residential, Commercial, & Industrial American Air Filter Company, Inc. $430 - 1.4x

Mar-16 Talsar S.A. ARG Water heater production and distribution under the Señorial brand Residential Grupo Rotoplas, S.A.B. de C.V. $36 5.2x 1.8x

Dec-15 Elster Group SE DEU Heating systems and gas, water, and electricity meters Residential, Commercial, & Industrial Honeywell International Inc. $6,187 14.3x 3.1x

Dec-15 CEM S.A., Prior to Merger with Rheem Chile SpA CHLAutomatic water heaters, forced draft heaters, thermo-electric ponds, solar systems, and dishwashers

Residential Rheem Chile SpA (nka:CEM S.A.) $70 12.8x 2.2x

Oct-15Hitachi Appliances, Inc., Global Air Conditioning Business - 60%

USARefrigerant flow systems, residential air-conditioning solutions, chillers, and rotary and scroll compressors

Residential, Commercial, & IndustrialJohnson Controls Inc. (nka:Johnson Controls International plc)

$2,500 - 1.6x

Sep-15 Tecumseh Products Company USAHermetic compressors and condensing units for refrigeration and air conditioning applications

Residential & CommercialAtlas Holdings LLC; DENO Investment Company II, Inc.

$127 6.5x 0.2x

Aug-15 Nuaire Limited GBRFans, ventilation systems, heat recovery systems, multi-point extract systems, controls and ancillaries, and air handling units

Residential, Commercial, & Industrial Polypipe Group plc $227 11.3x 2.3x

Jun-15 Purafil, Inc. and Kaydon Custom Filtration Corporation USA Air and chemical filtration systems, and liquid separation solutions Residential, Commercial, & Industrial Filtration Group Corporation $95 - 2.4x

Feb-15 Brivis Climate Systems Pty Ltd AUSHeating systems, air conditioning systems, ducted reverse-cycle inverters, hi-wall inverter split systems, and combination climate systems

Residential Rinnai Australia Pty. Ltd. $38 - 0.8x

Jan-15Compagnie Industrielle d'Applications Thermiques SA - 46%

FRAWater chillers, heat pumps, precision air conditioning units, ventilation and extraction fans, air heaters, and others

Residential, Commercial, & Industrial UTC Building & Industrial Systems, Inc. $140 - 0.6x

Dec-14 AERCO International, Inc. USABoilers, water heaters, energy recovery systems, venting systems, and related accessories

Residential, Commercial, & Industrial Watts Regulator Company $265 - 2.7x

Oct-14 Quinn Radiators Limited GBRPanel radiators, including round-top, compact, and low-surface temperature radiators; towel radiators; and design radiators

Residential RHP Bidco Limited $32 - 0.4x

Jun-14 Air Distribution Technologies, Inc. USA Air distribution, ventilation, movement, and control solutions Residential, Commercial, & IndustrialJohnson Controls Inc. (nka:Johnson Controls International plc)

$1,600 13.3x 1.7x

Feb-14 Gestion Jerico Inc. CANCommercial tanks and dispensers for oil and gas industry; residential tanks, furnaces, boilers, and other HVAC products

Residential & Commercial TerraVest Capital Inc. $51 5.7x 1.0x

Sep-13 GD Midea Holding Co., Ltd. - 59% CHNHeating systems, ventilation and air-conditioning systems, compressors, refrigerators, washing machines, and other appliances

Residential & Commercial Midea Group Co., Ltd. $7,438 7.3x 0.7x

Mean 9.4x 1.5x

Median 9.9x 1.5x

Description BuyerSize

(US$MM)EV/

EBITDAEV/Rev.

End Market(s)Date Target Country

Nov-16 Luvata Heat Transfer Solutions Business USAHeat exchanger coils, commercial refrigerators, and industrial coolers, complemented by anti-corrosion coating solutions

Commercial & Industrial Modine Manufacturing Company $424 7.2x 0.8x

Aug-16 MAHLE GmbH, Industrial Filtration Business DEUIndustrial filtration solutions for three primary segments: internal combustion engine, air filtration, and fluid filtration

Commercial & Industrial Filtration Group Corporation $58 - 0.3x

Jul-16 SPIG S.p.A. ITACooling towers, condensers, heat exchangers, pumps, pipes, filters, and dosing and auxiliary equipment

Commercial & Industrial Babcock & Wilcox Enterprises, Inc. $173 9.7x 0.9x

May-16 Follett Corporation USAIce storage bins, transport systems, and dispensers; medical-grade refrigerators and freezers for the foodservice and healthcare industries

Commercial & Industrial The Middleby Corporation $209 - 1.5x

May-16 Thermal Dynamics International Corporation USA Heat exchangers, radiators, and charge air cooling products Commercial & Industrial Zhejiang Yinlun Machinery Co.,Ltd. $57 9.9x 1.1x

Apr-16 Hussmann Corporation USADisplay cases, refrigeration systems, LED lighting, glass doors and lids, walk-in products, and digital shopper engagement platform

Commercial & Industrial Panasonic Corporation of North America, Inc. $1,545 - 1.4x

Dec-15 Kysor Panel Systems, inc. USA Coolers, freezers, and insulated panel and refrigeration systems Commercial & Industrial D Cubed Group, LLC $85 - 0.7x

Mar-15 FRIGOBLOCK Grosskopf GmbH DEURefrigeration machines, evaporators, compartment technology products, and alternator systems

Commercial & Industrial Ingersoll-Rand Plc $111 - 2.4x

Oct-14 Eclipse, Inc. USABurners, heat exchangers, shutoff and control valves, process measurement and control solutions, and related accessories

Commercial & Industrial Elster Group SE $158 - 1.3x

Jul-14 Sabiana S.p.a. - 90% ITAHeaters, radiant heating panels, air handling units, fan converters, water chillers, and other appliances

Commercial & Industrial AFG Arbonia-Forster-Group AG (nka:Arbonia AG) $121 - 1.4x

Mean 8.9x 1.2x

Median 9.7x 1.2x

End Market(s) BuyerSize

(US$MM)EV/

EBITDAEV/Rev.

DescriptionDate Target Country

Recent M&A Transactions – Residential HVAC/R

*Announced; not yet closed

Recent M&A Transactions – Commercial & Industrial HVAC/R

*

*

*

*

*Announced; not yet closed

Sources: S&P Capital IQ, Mergermarket, Freedonia, MarketsandMarkets, Research Nester, Daikin Industries, Transparency Market Research, Research and Markets, International Institute of Refrigeration


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Representative Engagements


Attending AHR Expo 2017 and interested in learning more? Schedule a one-on-one session with one of our industry professionals. Please contact Mike Hong at: [email protected](571) 482-3436

Since 1999, Seale & Associates has been the trusted advisor to highlyrespected public and private companies from around the world, with atrack record of success in a diverse range of industries. Seale is an eliteboutique global investment banking firm with extensive experience inmergers and acquisitions (M&A), corporate finance advisory, andenterprise level strategy consulting. Our experienced team ofprofessionals are committed to serving clients with excellence andintegrity, while offering innovative ideas and solutions to addresscomplex dealings. All securities related transactions are cleared throughSeale Capital, Inc., a registered broker dealer and member of FINRAand SIPC.

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Robert E. WhitneyManaging [email protected]

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HVAC/R M&A Update (January 2017)

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