My family tries to live as holistically as possible. We make a lot of our own food and stay away from things that are heavily processed and have a lot of additives, preservatives, and common allergens. That means we like to buy snacks from independent brands that are transparent about their recipes, and one of our favorites in recent years was Siete chips, tortillas, and taco shells.

But Roman, what does this have to do with HVAC? Patience… you’ll see in a minute.

Siete has a neat story. It was started in the mid-2010s by a Mexican-American family of seven (hence, siete!). The founder had autoimmune diseases that were aggravated by grains and dairy, so she and her brother began making tortillas with almond flour. This recipe allowed her and many other people like her to enjoy Mexican and Tex-Mex cuisine without getting sick.

One family’s genuine care for human health was what helped Siete get off the ground and become part of many other families’ pantries—including my own.

In late 2024, Siete was bought out by PepsiCo, a giant conglomerate, for $1.2 billion. Over the past several months, my wife and I have noticed that the quality has gone way down. The tortilla chips are smaller and just don’t taste the same. And then we saw that the ingredients had changed; there are new preservatives in some products and cassava starch instead of whole cassava flour. PepsiCo has gone the “processed food” route with Siete, much like their other famous (and highly profitable) chip brands: Lay’s, Tostitos, and Cheetos.

What Happened?

Siete began as a family-owned company on a mission: to create a way for people with food sensitivities to eat and enjoy Mexican and Tex-Mex cuisine and to “help more people feel included at the table.” That quote is still in the “About” tab on their website, but the brand has already seen small changes to its formula—who’s to say it won’t undergo other changes that don’t align with the original mission?

PepsiCo didn’t just buy the recipe and the right to make money from it. They bought the trust that came with the Siete brand. Siete’s logo is still the same. The website still has a unique, warm, intimate feel to it. But PepsiCo has no connection to the family, community, or mission that made the company what it was. PepsiCo’s mission is to make Siete’s products as profitable as possible. Changing ingredient formulas, especially in ways that make the products cheaper to manufacture, and raising prices are the ways to do precisely that.

How’s This Relevant to HVAC?

Siete is just one example of what happens when a large conglomerate buys out family-owned companies. We in the HVAC industry are no strangers to this same story, though it has mostly been through conglomerates with private equity-backed funding (whereas PepsiCo is backed by public shareholders, mostly from firms like the Vanguard Group and BlackRock). In any case, a mom-and-pop business that once stood alone becomes part of a much larger portfolio. The new conglomerates swap “ingredients” in the business formula, and those changes come with consequences.

How Do Private Equity Firms Work?

Private equity (PE) firms often rely on a tactic called “leveraged buyouts.” In a nutshell, that means they pay a relatively small percentage out of pocket but mostly use money they don’t already have; they use collateral from the business to finance loans used to purchase the company. In other words, the debt needs to be repaid with earnings from the company—money that could’ve gone toward improving the business. Sometimes, the business can meet the metrics required, and sometimes it cannot. When it cannot (and even when it can, but the firm plans to sell in a few years and wants to maximize value at all costs), that’s when corners start getting cut, and prices start going up to compensate.

The goal of PE buyouts is usually to sell the group of companies for an even bigger profit in a few years. The consolidation and “ingredient swaps” are usually much more rapid and high-stakes (for the firm, at least) than when a company like PepsiCo buys a brand for its market share over the long haul.

When large PE-backed conglomerates leverage buyouts on mom-and-pop HVAC businesses, they don’t buy the business model. The business model is just one of the “ingredients” that they swap out and replace with something else that’ll cut costs and boost profits (such as by centralizing back office functions). But as with PepsiCo and Siete, PE firms buy the trust that comes with the name and capitalize on that.

Trust as Currency

When you see local HVAC companies bought out by conglomerates backed by private equity funding, do you see the buyers’ names on the trucks? Of course not.

Johnny Joe Schmoe’s Heating & Air is on the stickers on customers’ air handlers, is in the letterhead at the top of maintenance contracts, and had a booth at the town’s annual barbecue festival. Why would anybody change it if the brand already has a clear, trusted identity and a loyal customer base?

Just like PepsiCo in the Siete story, private equity firms buy out HVAC companies with a well-established brand identity. They buy the trust and sell it at a premium. That trust was built in alignment with the original company’s mission.

The Importance of an HVAC Business’s Mission

If you currently own an HVAC business, why did you start? If you want to own an HVAC business, why? While money and having more control over quality and day-to-day operations are definitely valid, I’ll bet that you partially did it (or want to do it) because you care about the people in your community. Those people are your neighbors, the people at your church, local business owners, and even family members (just like Siete).

Small HVAC businesses become successful because of the high level of care and service they put into...

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