This document analyzes the market shares, market size, and mergers and acquisitions (M&A) activity in the Heating, Ventilation, and Air Conditioning (HVAC) industry in North America. It also provides an overview of the key HVAC players active in North America, including Japanese player Daikin and U.S. peers Trane Technologies, Carrier Corporation, Johnson Controls and Lennox International.
North America Market Shares (2022)
The market shares can be estimated using the HVAC segment revenue of each HVAC company in North America in 2022 relative to the overall market size estimated in the following section. On that basis, Trane Technologies appears to be the market leader in North America, followed by Daikin, then Carrier.
| Ranking | Company | Market Share |
|---|---|---|
| No.1 | Trane Technologies | 20.9% |
| No.2 | Daikin | 17.5% |
| No.3 | Carrier | 15.6% |
| No.4 | Johnson Controls | 14.5% |
| No.5 | Lennox | 8.3% |
Source: DealLabs’ estimates of each company’s North American HVAC revenue in January-December 2022 based on annual reports and other data.
Source: DealLabs’ estimates of each company’s North American HVAC revenue in January-December 2022 based on annual reports and other data.
Source: DealLabs’ estimates of each company’s North American HVAC revenue in January-December 2021 based on annual reports and other data.
A comparison of the market share rankings of the top five companies in 2021 and 2022 shows that Trane Technologies remained in first place. Comparing market shares in percentage terms, the market shares of Carrier, Johnson Controls and Lennox have declined or remained flat, while the market shares of the top two companies, Trane Technologies and Daikin, have increased. According to this database, DealLab estimates the North American HVAC industry was worth $43.6 billion in 2021 and $49.6 billion in 2022. While the market as a whole grew by approximately 14%, the top two companies significantly grew their sales and further increased their market share.
Daikin, in particular, has significantly increased its market share even as the market has been growing, and it appears the company’s recent M&A strategy and strategies to strengthen its sales and supply capabilities have been successful.
The North American market is dominated by duct-type air conditioning systems. This has historically been a barrier to entry for Japanese HVAC players who specialize in ductless air conditioning systems.
In order to expand its range of locally suitable HVAC equipment, Daikin acquired McQuay (OYL Industries), which was strong in large air conditioning systems, in 2008 and Goodman, which is strong in residential air conditioning equipment, in 2012.
The company has introduced products that combine Daikin’s core strengths in energy saving, inverter and refrigerant technologies with duct-type air conditioning systems that are dominant in North America. In addition, Daikin’s enhancement of its distribution channels and strengthening of maintenance and servicing capabilities through the acquisitions of Abco, Thermal Supply and AirReps from 2020 onward appears to have contributed to its strong progress. Even in the face of declining industry demand, Daikin is taking steps to ensure growth in market share through local production and efforts to strengthen its product development, supply capabilities, and sales network.
In March 2023, Daikin announced the acquisition of a company involved in large-scale air conditioning systems for data centers, indicating that it is also making investments related to growth industries. (Details are also provided in the section on major M&A below)
Along with the expansion of its U.S. operations, Daikin’s market capitalization has also outperformed the Nikkei 225.
Evolution of Daikin’s M&A and Market Capitalization
Snapshot of key metrics
The table below summarizes dividend payout ratio, ROE and the revenue growth rates (over the past three years) of Trane Technologies, Daikin and Carrier. Daikin has outperformed competitors in terms of sales growth, Carrier in terms of ROE, and Trane in terms of dividend payout.
*Dividend payout ratio is calculated based on TTM as of June 2, 2023.
**ROE is calculated based on net income for the previous fiscal year and the average amount of shareholders’ equity at the beginning and end of the fiscal year.
***Sales growth rate is calculated as the compound annual growth rate (CAGR) over the past three years.
Revenue breakdown by region
Looking at revenue by region, the largest player, Trane Technologies, focuses on the North American market, while Daikin has a well-balanced geographical presence with a strong footprint in the U.S., China, Japan, and Europe.
The revenue composition of Trane Technologies indicates that even HVAC giants face challenges to expand globally due to differences in consumer preferences and product technologies in each region. However, Daikin has overcome such difficulties and moved ahead of competitors in successfully developing globally as an HVAC player, and is expected to continue to expand its share by strengthening its supply and sales capabilities.
In October 2022, Trane Technologies announced the acquisition of AL-KO Air Technology, a major German air conditioning manufacturer. AL-KO Air Technology has strengths in sales in Europe and Asia.
In April 2023, Carrier announced the acquisition of Viessmann Climate Solutions, a major German air conditioning manufacturer. It is a large deal, with an acquisition amount of 12 billion euros (approximately 1.6 trillion yen), equivalent to approximately 13 times the expected enterprise value in 2023.
Since both the acquired companies have strengths in sales outside the Americas, each company has followed Daikin’s lead in accelerating their global development, and it is expected that the industry will continue to undergo significant restructuring worldwide.
Market Size (U.S. and Global)
Based on third-party market research data laid out below, DealLab estimates the North American HVAC industry was worth $49.6 billion in 2022.
| Year | Market Size | Growth Rate* |
|---|---|---|
| 2022 | $49.6BN | 13.76% |
| 2023 | $51.8BN | 4.44% |
| 2028 | $63.28BN | 4.08% |
*Projected year-on-year growth rate for 2023, and the Compound Annual Growth Rate (CAGR) is projected for the period between 2023 and 2028.
*The growth rate from 2021 to 2022 is calculated based on the actual data for 2021 in our database.
According to research company Research and Markets, the North America HVAC system market size grew from $49.6 billion in 2022 to $51.8 billion in 2023. The market is expected to grow at a 4.1% CAGR from 2023 to 2028. DealLab forecasts that the market size will be $63.28 billion in 2028.
The main reasons for the growth of the HVAC market in North America are thought to be advancing technological innovation and growing demand for environmentally-friendly systems. Developed as a smart system for air conditioning, smart thermostats are a system that uses sensors to detect the temperature and humidity of each room and enable temperature adjustments that prioritize designated rooms. In North America, where central air conditioning, which uniformly adjusts temperature, is dominant, the introduction of smart thermostats is expected to lead to an increase in the purchase and replacement of new air conditioning systems.
In addition, demand for HVAC systems in new buildings is also increasing in line with increases in commercial and residential buildings. An increasing number of people are also focusing on indoor air quality in order to maintain their health, and there is thus sufficient demand for the installation and maintenance of HVAC systems in the renovation and repair of existing buildings.
According to MarketsandMarkets, the size of the global HVAC industry (air conditioning) market was $203.2 billion in 2022. This indicates that the North American market is a very large market, making up approximately 20-30% of the global market.
According to Mitsui & Co. Global Strategic Studies Institute, the size of the global market in 2020 was 21.8 trillion yen, while the size of the Japanese market in the same year was approximately 1.8 trillion yen. The North American market is estimated to be about three times the size of the Japanese market.
Source: Mitsui＆Co global strategic studies institute
HVAC market overview
The HVAC market is classified into two segments: the equipment segment, where industry players manufacture and sell HVAC equipment such as heating, ventilation, and cooling equipment, and the solutions segment. In addition to the sale of equipment, in the solutions segment, companies are required to provide efficient energy management of entire facilities and buildings, including maintenance. The segment has been expanding rapidly in recent years.
Heating, ventilation, and cooling equipment is further subdivided into heat pumps, boilers, purifiers, ventilation fans, dehumidifiers and humidifiers, unit air conditioners, VRF systems, chillers, and portable air conditioners.
Selected M&As in North America
- 1979 Acquisition of Carrier by United Technologies
- 2007 Acquisition of Trane Technologies by Ingersoll-Rand
- 2011 Acquisition of Carrier’s South American operations by Midea Group
- 2012 Acquisition of Goodman Global by Daikin
- 2014 Acquisition of Air Distribution Technologies (U.S.) by Johnson Controls
- 2016 Management integration of Johnson Controls and Tyco
- 2018 Establishment of a joint venture by Mitsubishi Electric and Ingersoll Rand to sell ductless air conditioners
- 2018 Spin-off of Carrier by United Technologies
- 2020 Spin-off of Trane Technologies by Ingersoll-Rand
- 2020 Acquisition of air conditioning dealers Abco, Robinson, and Stevens by Daikin
- 2021 Acquisition of air conditioning wholesaler Thermal Supply and commercial air conditioning distributor AirReps by Daikin
- 2021 Acquisition of major air conditioning distributor Temperature Equipment (TEC) by Carrier and major U.S. air conditioning distributor Watsco
- 2022 Carrier makes Toshiba Carrier a subsidiary
- 2022 Acquisition of major German air conditioning company AL-KO by Trane Technologies
- 2022 Acquisition of major U.S. telecoms equipment company Venstar by Daikin
- 2023 Acquisition of major U.S. air conditioning and residential construction materials dealer Williams Distributing by Daikin
- 2023 Acquisition of U.S. air conditioning company Alliance Air Products and CM3 Building Solutions by Daikin2023 Announcement of acquisition of major German air conditioning company Viessmann Climate Solutions by Carrier
In recent years, M&As of air-conditioning-related companies by Daikin stand out. One reason for this is Daikin’s efforts to achieve a leading market share in the North American HVAC market.
In fact, in 2021, Daikin set a target for funds to spend on M&A of 600 billion yen for the three years through fiscal 2023, but in 2022, the company revealed that it may pursue M&A beyond that amount and may even actively consider large deals worth more than 100 billion yen.
The 2022 acquisition of Venstar enabled Daikin to offer Venstar’s remote services for air conditioning equipment.
In addition, Alliance Air Products and CM3 Building Solutions, whose acquisitions were announced in 2023, provide large air conditioning systems for data centers, meaning that Daikin is expanding its presence in the data center air conditioning domain, where demand continues to grow.
According to a report by research firm IMARC Group, the North American data center market is expected to grow at a 4.32% CAGR from 2022 to 2027. Trane Technologies and Carrier also sell data center-related equipment, and the competition for market share is expected to accelerate in the future.
Key HVAC players snapshot
Daikin
Daikin is Japan’s leading HVAC manufacturer, founded in 1924. It is one of the world’s top manufacturers of industrial heating and air conditioning equipment. It has expanded its business globally by acquiring Goodman Global, which is strong in duct systems, and OYL, a major air conditioner manufacturer in Malaysia. The company is also engaged in the fluorinated compound and other chemical products business.
Carrier Corporation
Carrier Corporation is a leading U.S.-based HVAC manufacturer. In 2020, Carrier air conditioning operations were spun off from United Technologies, together with elevator (Otis) and aircraft components businesses. The company also has strengths in transportation refrigeration equipment and fire alarms.
Johnson Controls (York International Corporation)
York is a U.S.-based HVAC manufacturer and a subsidiary of Johnson Controls.
Johnson Controls is a U.S.-based company founded in 1885 that provides commercial HVAC control systems, security systems, fire detection systems, and building management services. The company invented the electric thermostat. In 2015, Johnson Controls formed a joint venture with Hitachi Appliances in the HVAC field. In 2016, it merged with Tyco International, which is strong in the fire alarm field. The company operates in 150 countries around the world, offering energy efficiency solutions and various automation businesses. It was strong in the field of automotive batteries but sold the business in 2018.
Trane Technologies
Trane Technologies is a U.S.-based HVAC manufacturer. The company was a subsidiary of Ingersoll-Rand, a U.S.-based manufacturer of transportation temperature control equipment, golf carts, and air compressors, and was spun off as Trane Technologies in 2020.
About Ingersoll-Rand
Ingersoll-Rand, a U.S.-based industrial equipment manufacturer founded in 1871, merged with Gardner Denver, a manufacturer of vacuum pumps, compressors, and other industrial machinery, in 2020. Prior to the merger, the HVAC business was spun off as Trane Technologies.
Top-class companies like Allegion in the security industry and Hussmann in the refrigerated showcase industry (sold to Panasonic in 2015) are spun off from Ingersoll-Rand. It is also strong in compressors and air tools and transport refrigeration equipment. Its golf cart business was sold to Platinum Equity in 2021.
Lennox International
Lennox is a U.S.-based HVAC manufacturer founded in 1895. The company's strengths lie in the residential and commercial air conditioning as well as commercial refrigeration businesses. In the refrigeration business, Lennox supplies unit coolers, fluid coolers, air-cooled condensers, air handlers and refrigeration rack systems to supermarkets, convenience stores, restaurants, warehouses, and distribution centers.
