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Deal Stories: The Heat Rose Slowly for Amalgam’s HVAC Play


One thing that Arun Shukla and John D’Angelo had in common is they both approach deal-making with a lot of caution.

Shukla, an engineer trained at the prestigious Indian Institute of Technology, had a long career in construction, software, and management consulting before founding Amalgam Capital, an independent deal sponsor in Chapel Hill, North Carolina (watch a video of Shukla discussing Amalgam and its strategy with Axial’s chief executive Peter Lehrman below). 



D’Angelo, also an engineer, spent 16 years as the president of State Mechanical Services in Aurora, Illinois, growing it to be a $65 million firm that designs and builds commercial heating, ventilation, and Air Conditioning (HVAC) systems.

He and his partner explored selling the company on and off over the last several years, but nothing came of it. 

“We interviewed potential acquirers a few times, and nobody seemed like a good fit,” D’Angelo says. “So we just carried on what we were doing.” 

Perhaps the biggest sticking point was finding a buyer that would keep the company and its people in place. 

“We felt we had created our own culture,” he said. “We didn’t want all that to blow up and have all our people leave.”

Meanwhile, Amalgam, which Shukla formed in 2020 with two of his sons and two partners from his consulting firm, SLKone, identified the fragmented HVAC business as a prime opportunity for consolidation and expansion. Extreme temperature fluctuation from climate change is stressing existing HVAC systems. And the coronavirus pandemic focused attention on indoor air quality.

“COVID changed the way we look at the air we breathe,” Shukla explains. 

Moreover, they saw an opportunity for a new type of large HVAC firm that combined design, construction, and maintenance to serve large commercial real estate owners like Blackstone and Traditionally, HVAC firms that worked in building construction were separate from those hired by owners for routine service. 

At first, Shukla said, it was challenging to find acquisitions that had all the capabilities needed for this strategy.

“We saw several businesses where there wasn’t good chemistry with the owners,” he says. “They were more in the commoditized side of the business rather than taking on the more difficult projects, which is where we think we can excel.”

The conversation was very different when Shukla was introduced to D’Angelo in mid-2020 after after privately receiving a notification via the Axial platform from State Mechanical’s advisor, Baker Group. 

Shukla saw that State Mechanical had the capabilities Amalgam was looking for: It handled sophisticated design-build projects and had a modest service business as well.

D’Angelo, in turn, was reassured that Amalgam was not out to buy State Mechanical’s customers and get rid of its staff.

“With all our investments so far, we’ve kept the management team in place because we see our job is to motivate them, not replace them,” Shukla explains.

Despite the commonalities, it still took nearly a year for the deal to come together. 

“There was a fair amount of due diligence and discovery going on to make sure they were who we thought they were and we were who they thought we were,” D’Angelo said. “The fact that it took a little longer than we would’ve liked probably was good in the end because it gave, it gave us a real opportunity to get to know each other and get on the same page.”

Shukla confesses to some impatience at the slow pace of the deal. 

“As a consultant, I’m always thinking about optimizing, how to do things faster,” Shukla says. “I learned that sellers are making an emotional decision as much as a financial decision. They’ve been living with their company for decades.”

Eventually, Amalgam introduced D’Angelo to Delos Capital, the New York private equity firm that had agreed to finance its HVAC deals. “We felt good about Delos, and it all began to fall into place,” D’Angelo says. 

Meanwhile, Amalgam had found two more HVAC companies to acquire. One is a smaller Chicago-area company that will expand State Mechanical’s service business. The other, Hampton Roads Mechanical in Chesapeake, Virginia, is a design-build firm with a lucrative relationship with the U.S. Navy. 

The three companies were combined under the new brand MechanAir, with D’Angelo as chief executive in October.

The new company is already in talks with several other potential acquisitions, D’Angelo said. And it is working to consolidate functions that benefit from scale, such as banking and insurance relationships.

Amalgam is using its consulting expertise to help the company improve its financial efficiency.

“We can do a better job doing the analytics to help them focus on the profitable jobs instead of unprofitable ones,” Shukla said. 

But it is not going to get involved in the way MechanAir works with clients.

“They know their customers better than we do,” Shukla says, “so there’s no point in our upstaging them.” 

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