Buy-to-grow strategy boosts $60M business

When Theo Etzel took over a Naples-based air conditioning company in 1995, the businessman had no HVAC industry experience.

But his previous expertise in owning and managing retail businesses taught him the value of striving for superior customer service and eliminating pushy sales tactics — which he has used to lead the business, Conditioned Air, to unprecedented growth. In 2018, Conditioned Air had $52 million in revenues, up 6.1% from $49 million in 2017 — and nearly 200% from around $18 million a decade ago. Officials project around $60 million in 2019.

Etzel has since passed day-to-day leadership of the firm to long-time employee Timothy Dupre, who started as an apprentice in 1997. Etzel has also remained closely tied to the company as chairman, providing guidance and input. Together, Dupre and Etzel are now working on a new strategic goal: acquiring smaller air conditioning companies in the region with $5 million to $10 million in annual revenue. The plan, Etzel says, is to grow market share in their backyard and eventually move into the Tampa area.

Etzel says they do not have a specific number of acquisitions in mind and that they don't have a “hard and fast aspiration for top line revenue.” A realistic goal? For Conditioned Air, he says, to hit $100 million in revenue. 

“As long as an acquisition makes sense, we would look at it. As far as we are concerned, the main thing is a cultural fit to the Conditioned Air philosophy of ethical corporate behavior toward our employees and our customers,” Etzel says. “Thus, we are more selective in our acquisition criteria and process. I expect if we find the right company to acquire, we would be in Tampa in the next couple of years. It makes sense as an extension of our geographic area and growth.”

Their strategy already produced a deal: Conditioned Air recently acquired Honest Air Conditioning, a Venice-based company with some 30 employees. Etzel and Dupre didn’t release financial details about the acquisition, in which Honest Air will operate under the Conditioned Air umbrella. With Honest Air, Conditioned Air now has about 390 employees serving Collier, Lee, Charlotte, Sarasota and Manatee counties.

The why behind the Honest Air acquisition follows the corporate playbook for buying industry peers and sometimes competitors: It will give Conditioned Air efficiencies in purchasing power, increased coverage of customers in a given area and centralize some administrative work.

Other firms have approached Conditioned Air looking to sell or partner, but the timing was off. Now with the support of a private equity firm — Boston-based Gemini Investors invested in it about four years ago — Conditioned Air is in buy mode. It's at least the fourth home services in the region to have received private equity capital. 

“It has been a great partnership that has allowed us to grow, and [it] brought a higher level of analytics to our operation,” Etzel says. “All our management team remained in place at the time of the partnership, and we continue to enhance the leadership team to meet our growing demands."

With funding in place, Dupre and Etzel target companies that share their family-style corporate culture. They get referrals for potential acquisitions via networking, business brokers and people or companies they already know. “We do internal homework as well, so we know some of the potential good fits already,” Etzel says.

Another key to growing through acquisitions? Knowing what you don't want to buy, such as companies that hurt the industry’s image with deceptive practices, like claiming parts or entire units that work well are going bad or need to be replaced entirely. Both executives have seen that — and they avoid those firms in the acquisition hunt. 

It's also why, acquisition or not, Conditioned Air trains employees to treat its customers the same way they would treat their mother. The firm also doesn’t have sales quotas. 

“We like to say that the only thing that should be under high pressure is the refrigerant, not the customer," Etzel says. "People appreciate our approach and the trust we build with them, and they tell others, and so we grow."