IIAR Interview with HARRY GRAY

Private Equity Interest in Refrigeration Continues to Increase

Several industries are experiencing consolidation, including refrigeration, and Condenser sat down with Harry Gray, CEO of Kelvin Group, to learn more about changes that are taking place.

QLet’s start by talking about Kelvin Group’s acquisitions. How many companies have you acquired?

A We’ve acquired nine so far. We’ve grown a lot in a short amount of time, and we’re still very much in acquisition pursuit, maybe even more than ever.

Q Is there anything specific you’re looking for in new acquisitions?

A We are well-known for industrial refrigeration, but we also have fastgrowing industrial HVAC and commercial refrigeration. We can offer them resources they wouldn’t have had otherwise from an innovation, recruiting, fleet management, global safety, and supply chain standpoint. We have a vision and a strategy and companies are going to get more customers just by sharing the Kelvin Group wallet.

Q Why are we seeing private equity interest in refrigeration increase?

A The private equity industry has an abundance of dry powder. Funds are bigger than ever, and they need to find a way to deploy it. If you were to describe the attributes of a PE play, they often like things that won’t be offshored. They want an industry that will always be here, and they like fragmentation.

There is a lot of attractiveness in the refrigeration space. For us, in industrial refrigeration, it is the beginning of the cold chain. Without the customers we have, you don’t have food or drugs. The more steady service mix a company in our space has, the more recessionresilient you are. Assets have to be maintained. In our experience, recessionary times can be a boom for service even if companies are deferring projects. We work very hard on our mix.

I would imagine most industrial refrigeration businesses are still founderowned, and these companies eventually need a generational transfer.

Q Is labor availability, such as technicians, driving any consolidation?

A There is a nationwide macroeconomic issue, which is that we’ve persuaded America’s youth to pursue paths outside of the trades. We should be advocating for the trades. Some trades pay very well, and you’re always going to be in demand. The labor statistics point out that there aren’t enough Americans in the trades.

For us, we work very feverishly to focus on the field, the engagement, the safety, the training, and the morale. At Kelvin Group, the technician who is working, in some instances seven days a week, is the lifeblood of our company. You need to pay fairly, treat them fairly, offer good benefits, and grow their careers. The next challenge is bringing in the younger people, so you don’t have a generational gap. We have Kelvin University, so we can put them through our curriculum, and we can help them grow with us.

Q What are the challenges with consolidation?

A The hardest thing about consolidation or integration is the cultural piece. Systems integration and process implementation are easily the hardest parts of cultural integration.

 Q How do you build the culture?

A In my role, I try to be very closely connected with the field. I pick up the phone and try my best to call technicians all of the time. I conduct a number of communications across our company featuring employees. We try to build a culture where the business unit presidents and executives are also in the field. If you are engaged with your field, you’re engaged with your customer.

In most businesses, the founder is still around in some way. During the transition period, we’re always better off when we explain and walk them through what the entire experience is going to be early on and help them ease into it. We discuss the new cadence, new types of reporting, and different controls. The main thing is to not let that deviation from what they’re accustomed to create anxiety.

We try to make the business fun again for the new teammates. We work very hard at making them feel like a part of the family. In many cases, they’re selling the family business to become part of a bigger family. If we’re interested in their business, it is because they’ve proven a dedication to the field and customers. If we can get them back in the fun part and demonstrate we can take care of their employees, that is valuable.