CoolSys Inc., the Brea-based parent of a collection of refrigeration and heating companies that’s been among Orange County’s fastest-growing private firms the past few years, is back in the acquisition market after snapping up two East Coast firms.
“CoolSys is excited to relaunch our M&A growth strategy” after a hiatus because of the coronavirus, CoolSys Chief Executive Adam Coffey said.
Coffey is aiming for a $2 billion valuation by 2023 by growing to $1.2 billion in annual revenue and a $150 million of earnings before income tax, depreciation and amortization. Last year, it posted about $500 million in revenue.
CoolSys has been growing at an annual 27% compound annual growth rate since Coffey took over in 2016. The company last year was sold to Los Angeles-based private equity firm Ares Management, which is helping fund the expansion.
CoolSys has 2,500 employees serving more than 4,000 customers in North America, including giant retailers like Starbucks Corp. and Costco Wholesale Corp.
Besides organic growth, Coffey is planning to make 30 to 40 acquisitions over the next five years, including a couple of large deals. CoolSys typically acquires firms with revenue above $10 million and earnings around $2 million to $3 million.
CoolSys said on June 22 that it acquired Eastern Refrigeration, a Colchester, Conn.-based commercial refrigeration and HVAC solutions provider that serves Connecticut, Rhode Island and Massachusetts.
Founded in 1975 by company President Pierre “Pete” Belisle, Eastern Refrigeration’s customers include Walmart Inc. and Whole Foods Market Inc.
“This strategic acquisition strengthens our market position in the Northeast by providing density in some existing markets and opening up new states for CoolSys,” Coffey said.
A week later, CoolSys acquired Richmond Refrigeration Service, which services Virginia, Maryland, North Carolina and West Virginia. This is the second acquisition made by CoolSys in the mid-Atlantic region in the past seven months.
“The acquisition of Richmond Refrigeration complements our acquisition of BRR Refrigeration seven months ago, giving us coverage across the entire state of Virginia while strengthening our presence in Maryland, West Virginia and North Carolina as well,” Coffey said.
Richmond Refrigeration Services, which dates to 1954, is based in Ashland, Va.
Terms of the latest acquisitions were undisclosed.
Customers Remain Open
In 2016, Boston private equity firm Audax Private Equity bought the predecessor to CoolSys—then called Source Refrigeration & HVAC Inc.—when it had about $240 million in annual sales and 1,200 employees.
Audax hired Coffey as CEO, who a year later changed the name and moved its headquarters from Anaheim to Brea.
Last year, Audax sold CoolSys to Ares Management for an undisclosed price that left management “smiling,” Coffey said at the time.
CoolSys’ operating businesses covers every stage of a heating or refrigeration system.
About 54% of CoolSys’ revenue comes from recurring maintenance service contracts and it has a 96% retention rate with key customers, according to a recent report from credit rating agency Moody’s Investors Service.
CoolSys’ broad geographic reach and status as a “one-stop shop” is a competitive advantage over smaller local or regional players, attracting large national or super-regional customers, Moody’s said.
A large portion of the company’s customers were designated as essential businesses and have remained open to serve the public during the pandemic.
CoolSys has spent time the past few months installing sneeze guards at checkout stands and counters, and replacing and upgrading HVAC filters at customer sites.