Watsco ($WSO): The Beauty of a Virtuous Cycle

Introduction

I’ve recently asked for help in Twitter to find companies carrying out consolidation or roll-up processes. I’ve received a lot of ideas (that were gathered in this article) but one of the most repeated companies was Watsco (WSO). I had already heard many positive comments about this company before but I’ve never decided to analyze it. After the overwhelming mentions, I think now it is the time. Let’s start from the beginning.

WSO was incorporated in Florida in 1956 and started as a manufacturer of parts, components and tools used in the air conditioning, heating and refrigeration equipment (HVAC/R) industry, growing slowly to reach $25m in revenues by 1988. In 1989 the Company decided to shift from manufacturing to distribution and this movement changed everything. In 1989 it earned $64m in revenues and since then it have increased almost 100-fold to more than $6 billion, becoming the largest distributor in the HVAC/R distribution industry in North America. Nowadays WSO ope…