Carrier Global Corporation, established as an independent public company, following its spinoff from United Technologies Corp. in April 2020, is one of the top three global HVAC equipment manufacturers. In this Research Note, we examine two of its adjacent business areas - the Fire & Security and Building Automation businesses, based on Carrier’s 2021 10K Report, investor presentations and building technology-related activities throughout 2021.
Carrier's Fire & Security brands include Kidde, Edwards, GST, LenelS2, Marioff, Autronica, Aritech, Det-Tronics, Onity, Supra and Fireye which provide product and technology innovations that are supported by installation, maintenance and monitoring through a network of channel partners, along with web-based and mobile applications and cloud-based services.
For the year ended 31st December 2021, net sales in the Fire & Security segment were $5.5 billion, an 11% increase compared with the same period of 2020. The organic increase in net sales of 7% was driven by improved results across each of the Fire & Security segment's businesses. Field service sales (6%) and product sales (8%) both benefited from improved end-markets in regions that were previously impacted by COVID-19.
Carrier has repositioned itself as a core fire and security products business with the sale of the lower margin installation business of Chubb Fire & Security, announced in July 2021. The planned divestiture of this $2.2 Billion business to APi Group was completed in January 2022 for an enterprise value of $3.1 billion. The sale enables Carrier to focus on its core fire & security product businesses which now account for around $3.4 billion in revenues and allows them to re-allocate proceeds from the divestiture toward higher strategic imperatives, including digital and recurring SaaS revenues.
Subsequent 2021 acquisitions in fire and security included two small bolt-on purchases:
- In September 2021, Carrier acquired Broker Bay, a US developer of real estate scheduling software, which complements Supra electronic lockbox access solutions for North American real estate agents. The acquisition strengthens Fire & Security Access Solutions business.
- In October 2021, Carrier announced the strategic acquisition of Cavius, an innovative Danish residential alarm company that provides a complete range of smoke, heat, flood and carbon monoxide alarms. Cavius has developed the world's smallest photoelectric smoke alarm. Cavius will strengthen Carrier Fire & Security's residential fire safety solutions in Europe, which includes Kidde products.
The HVAC segment of Carrier is the largest business area with S11.4 billion revenues in 2021, encompassing products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers. Service and controls account for around $2.8 billion aftermarket revenues. Within the Commercial HVAC business, with almost $4 billion sales in 2021, several companies, namely Automated Logic, EcoEnergy Insights and Noresco together with Carrier branded offerings such as i-Vu, provide building automation systems and controls, IoT cloud platforms (eg. Cortix and Abound) and energy services to commercial customers.
Both the building automation and fire & security businesses are aiming to grow through digitally-enabled services and aftermarket revenues. The Abound Sustainable and Abound Healthy cloud-native IoT platforms are viewed as differentiated digital offerings to drive best-in-class lifecycle solutions. Currently Abound Sustainable is deployed across 750 million square feet.
Automated Logic, Carrier’s long-established building controls platform has been mostly U.S.-centric to date. However, the company has recently started to expand its global footprint outside North America as well as expanding its North American controls contracting reach.
In February 2022, Carrier acquired Systemax Pty Ltd, an independent Automated Logic controls contractor operating in Queensland and Northern Territory, Australia and in Papua New Guinea. Systemax will operate as part of Automated Logic.
In January 2022, Automated Logic acquired Integrated Control Systems Inc (ICSI), while in March 2021, the firm acquired CSO (Control Systems of Ohio and Control Systems of Michigan), both independent ALC controls contractors.
Following the September 2020 announcement of an Integrated Data Center Management (IDCM) solution, based on Automated Logic’s WebCTRL building automation system and Nlyte’s DCIM software, Carrier subsequently acquired Nlyte in October 2021 to strengthen and expand its offerings for the data centre vertical market.
With mid-teens growth in Automated Logic in 2021, the strategic repositioning in fire and security and its massive installed base of HVAC equipment, Carrier seems well placed to capitalize on growing its digital aftermarket revenues in commercial buildings.
This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.