In July 2022, European private equity (PE) firm Triton announced it had acquired a majority stake in the Germany-based Kälte Eckert Group, an installer of air-conditioning and refrigeration systems specializing in natural refrigerants. It was around this time that the PE sector renewed its interest in HVAC&R installers, with firms racing to acquire and consolidate companies. While Triton acquired five more Germany-based HVAC&R installers shortly after its investment in the Kälte Eckert Group, the company’s strategy wasn’t to simply follow the pack.
Instead, it intended to blaze a new trail.
Triton announced the launch of bluu unit in January 2024, an alliance of Germany-based HVAC&R contractors specializing in natural refrigerants. Alliance members are offered support with back-office functions, such as accounting and purchasing, and in recruiting and training technicians. Installer alliances are not a new concept, but bluu unit stands out for its focus on natural refrigerants.
This is precisely what makes it such an attractive investment, according to Andi Klein, Head of the Smaller Mid Cap Fund at Triton.
“Companies that cool with natural refrigerants are still a niche in Germany,” said Klein. “Most of their competitors use fluorinated refrigerants in their air-conditioning and cooling systems. As these are considered to be extremely harmful greenhouse gases and therefore set to be gradually banned by the EU, the sector needs to change.”
Guided by sustainability
While the EU’s revised F-gas Regulation has created a clear opportunity for the growth of bluu unit, Triton’s move into the natural refrigerants sector was also driven by its sustainability goals. Environmental, social and governance (ESG) standards shape the firm’s investment strategy, and in 2021 Triton announced its commitment to the Science-Based Targets initiative (SBTi) with the goal of aligning all its portfolio companies with SBTs by 2040.
“Making traditional industries greener is our approach because that way we have a much greater impact,” said Klein.
Klein spoke with NaturalRefrigerants.com about its sustainability strategy and the role natural refrigerants play in it.
This interview has been edited for length and clarity.
Sustainability is a key focus of Triton’s investment strategy. Can you detail the firm’s sustainability strategy and goals from a high level and how natural refrigerants fit into it?
AK: We evaluate through the lenses of regulation, the relative economics of competing solutions, technological advancements, consumer preferences and geopolitics in conjunction within our proprietary framework of approximately 40 sustainability trends and themes. We seek to understand companies working with natural refrigerants around such themes as decarbonization, healthy ecosystems, healthy working environments, green buildings and urbanization, where they may benefit from tailwinds.
How will Triton’s sustainability-focused investment strategy evolve as sustainability becomes further ingrained in the world of private equity?
AK: Triton continues to believe that understanding sustainability trends will enable us to make forward-looking investments into products and services aligned with how we live, produce and work in the future – and to build better businesses.
Given the continued focus of regulators and other stakeholders on reducing greenhouse gas emissions, including f-gases, and chemical pollution due to its harmful effects on humans and the broader environment, we believe that natural refrigerants will continue to grow in the economy. Therefore, there may be further opportunities for Triton to make investments in this area that align with our overarching approach of embedding sustainability in our investment framework.
Triton’s portfolio spans more than 40 companies across the business services, healthcare and industrial tech sectors. What opportunities are there for synergies or partnerships between these portfolio companies?
AK: Triton’s ESG team encourages shared learning between our portfolio companies. A collaborative atmosphere is fostered through monthly calls for all portfolio ESG representatives, an annual in-person ESG forum and regular topic-focused events and webinars.
There are opportunities for those portfolio companies working on natural refrigerants to bring new solutions and expertise to other companies in the Triton portfolio, for instance to food and medicine businesses. This can lower their own emission footprints and reduce operational pollution risks.
Aside from installers, where do Triton Partners see an opportunity to invest in the natural refrigerants industry or where does it believe opportunities will develop in the future?
AK: It is a core strategy from Triton to invest in traditional industries and develop them further, including around the topic of sustainability. We are convinced that optimizing existing companies, especially in terms of environmental protection, creates considerable value. There are many industries that require extensive cooling, for example data centers.
Natural refrigerants will be required on an industrial scale, and many manufacturers of air cooling, heat exchangers and similar will have to meet the increasing demand and regulatory requirements.
