Jan. 25, 2024

Longtime commercial HVAC company Climate Systems Inc. is being sold to its employees.

The company was founded by Dave Stadheim in 1984. The current partners are Gregg Welch, who was majority owner when the ESOP was announced, Dean Welch and John Schwartz.

“I weighed all our options, but after a lot of thought and soul-searching, I felt an ESOP was the best fit for Climate Systems,” Gregg Welch said.

“The HVAC industry is getting a lot of attention from outside investors and holding companies. The other options would have taken away from the local, small-company atmosphere that we have spent 40 years developing.”

There are about 40 employees, and the company is becoming a 100 percent ESOP, which doesn’t cost the employees anything. Instead, they accumulate shares that grow in value with the company and its profitability.

“It’s a retirement plan like a 401(k), but an ESOP typically can outperform a 401(k),” Welch said. “We would not be where we are today without our employees. They are talented in their field and dedicated to their jobs and to the team. We have built solid relationships with our customers, and we want to continue to provide the best service to them.”

Climate Systems is a manufacturer’s representative of HVAC equipment. The company installs and manages building automation systems in commercial and industrial buildings. There’s also a service division to support its equipment and to partner with contractors on startup and service.

“The economy has been very strong in Sioux Falls and the rest of the state,” Welch said. “The people and the quality of the product lines we represent are some of the leading manufacturers in our industry.”

Those include Greenheck, ClimateMaster and LG. Climate Systems covers the state of South Dakota along with corners of four borderings states. In Sioux Falls, the company recently worked on Jefferson High School and is completing work in buildings at The Steel District and the expanded Cherapa Place.

“We have a broad depth of HVAC knowledge and enjoy the challenge to be involved with unique projects that require a lot of knowledge and expertise,” Welch said. “We have a strong engineering controls and service background in our company that allows us to provide great teamwork with our customers and contractors.”

Retention has been “very strong the last several years,” he added. “The culture of the company is what has attracted and retained employees over the years. Our team has a positive attitude, the ability to listen to each other and their clients’ concerns, and they understand and solve problems together. What it all comes down to is integrity and respect for our customers.”

The company has offered “a very impressive benefit package for many years,” which includes a 7 percent dollar-for-dollar 401(k) match, but the ESOP makes the company even more competitive, Welch said. He called creating the ESOP a long, two-year process done with assistance from Eide Bailly, First Interstate Bank and First International Bank & Trust.

The partners have each agreed to a two-year contract.

“I am very confident that the team will be ready to move forward without us,” Welch said. “If we are not comfortable leaving in two years, we will stick around as long as it takes to ensure the success of Climate Systems and its customers.”