On Breakingviews: Carrier is buying the energy unit of Viessmann. It’s a setback for German and EU ambitions to create regional leaders in new tech. Yet for continental groups to compete globally, loss of control may be a necessary price, says pamela_msg
Heat pumps may not be the most obvious sector to lead a revival in transatlantic cross-border M&A, down 31% so far this year. The technology may help cut emissions by replacing gas boilers, and has been identified by the European Union as a critical industry, just like wind turbine and battery manufacturing. Brussels is implementing more relaxed
on state subsidies to avoid losing out to the U.S.’s green technology plan, the Inflation Reduction Act. Privately held Viessmann is riding this trend: its sales have grown at a 15% annual clip since 2020., Samsung and Mitsubishi are expanding rapidly in Europe and the likes of Viessmann are struggling to retain market share on their home turf. Teaming up with Carrier gives the German group better access to the U.S. market, as well as the benefit of Carrier’s expertise in air conditioning.
Carrier’s green pivot isn’t cheap. The group is paying around 17 times the Viessmann unit’s 2023 EBITDA, far more than its own forward multiple of around 11 times, as per Refinitiv data. Still, the price is not egregious: Viessmann’s Swedish peer Nibe Industrier is valued at 25 times EBITDA including debt. And Carrier reckons it can squeeze out cost savings equivalent to some $200 million. Taxed and capitalised on a multiple of 10, those could be worth some $1.4 billion in today’s money.
That valuation may also reflect the deal’s terms. Viessmann has secured job protections in Germany and a Carrier board seat for current Chief Executive Max Viessmann. But, with some 80% of the purchase paid in cash, the deal effectively sees a prized asset of the future handed over to American control, rather than remaining a European champion. But to thrive, rather than merely survive, such compromise looks like a necessary step.
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