New Deals: A contract food manufacturer, HVAC company, and 3 other finds

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NEW DEALS

1/ Food Co-Manufacturer

📍 Location: New Jersey
💰 Asking Price: $3,180,000
💼 EBITDA: $925,000
📊 Revenue: $5,300,000
📅 Established: 2000

💭 My 2 Cents: I really like the contract food manufacturing space (I’ve worked with a bunch myself!). It’s very demanding and expensive to build a facility that meets strict food safety standards, making it something small (and even larger brands) often cannot do on their own. It’s also complicated to set up production in a way that is efficient, flexible, and cost-effective. But, once clients have their formulations and processes established with a provider, they tend to be very sticky. All this applies to this food production company, as they come with a 7,500 sq ft leased facility fully equipped with $500K of FF&E, a long history of satisfied customers, and strong margins and cash flow. It’s also great that they're able to white label products and offer ancillary services to multiple brands, indicating there’s a lot of upside potential here and a lot of barriers for competitors. I’d want more detail on their revenues across their different product lines, who their key clients are, any client concentration issues, and their client retention metrics. I’d also need to understand their current capacity, how many shifts they’re running, and how much room for growth there is in the current facility. Separately, I’d want to understand if they have any specific certifications or niche certifications that would help set them apart (SQF level 2 or 3, gluten-free, etc.). Based on my experience, a lot of co-manufacturers don't even have websites and turn away customers, so sales and marketing could be an opportunity here assuming there's additional capacity available.

2/ HVAC Company

📍 Location: Suffolk County, New York
💰 Asking Price: $2,790,000
💼 EBITDA: $697,664
📊 Revenue: $5,538,891
📅 Established: 2011

💭 My 2 Cents: This is a truly full-service HVAC company that does everything in-house except for sheet metal fabrication. I really like how they can take a client from initial design all the way through build-out and servicing without needing to hire any subcontractors, as this allows them to offer higher quality service than competitors, have stricter quality controls, and capture the most value possible from contracts. I like that they have several major accounts with no client concentration issues, a current backlog of $2.5M, and a recently signed large commercial project of $5.5M. I also like that there is clear room to improve on their already impressive performance by modernizing internal systems and processes, actively selling to residential customers, and pushing more service work. Additionally, a new owner could look to bring metal fabrication in-house and save on the roughly $1M spent on this annually. I’d want to get a handle on their revenue split between installation and maintenance work, their typical cash flow cycle for new projects to include the time from bid through to payment, the level of their recurring revenue, how they secure and retain clients, and how their key client relationships would transfer to a new owner. I’d also need to know who the key license holders are in the business and if there is any redundancy. While any HVAC company warrants a serious look, this one stands out for their full suite capabilities, great commercial clients and contracts, and significant upside potential.

3/ Government Fleet Enhancement Company

📍 Location: King County, Washington
💰 Asking Price: $11,000,000
💼 EBITDA: $1,900,000
📊 Revenue: $10,000,000
📅 Established: N/A

💭 My 2 Cents: This vehicle enhancement company equips government vehicles with modern technology and custom components. Talk about a niche business! I like their decades-long proven track record, strong market position, and, in particular, their focus on very sticky government contracts. I also like their robust scale, as they operate from a 19,200 sq. ft. facility and process approximately 120 vehicles per month. Plus, there is $3M worth of net working capital assets included in the sale and a middle management team that handles daily operations, both of which are hard to come by. Given their reliance on government contracts, I’d need to know who their key clients are and how they work with government entities, if they have MSAs in place, the extent of their repeat business and recurring revenue, how much competition they face (if any), and what competitive advantages they hold in securing government work. Ultimately, this seems like the dream business for one of my readers out there!

4/ Bus Company

📍 Location: California
💰 Asking Price: $4,500,000
💼 EBITDA: $1,100,000
📊 Revenue: $6,000,000
📅 Established: 2000

💭 My 2 Cents: This bus and shuttle passenger transportation company operates a fleet of four buses and ten shuttles across six depots in Southern California and three depots in Mexico. Their cross-border operations, ability to serve diverse routes, loyal customer base, and workable scale have resulted in very strong cash flow and margins, while their location and existing infrastructure provide a solid foundation for continued growth. I’d need to explore the revenue breakdown between their US and Mexico routes, how they gain and keep new clients and riders, why their office workers are such a large part of their staff, what is involved in recruiting and retaining drivers, and if they have any online presence or reviews. I’d also want to check on the condition of their fleet, if there are any regulatory or legal issues specific to cross-border operations, and what would be involved in expanding into new routes or services. If that all checks out, then this type of company can be very interesting. The service is relatively straightforward, should come with a lot of FF&E, and if there are well-trained and qualified staff involved, a lot of operational know-how.

5/ Heavy Duty Equipment Assembler

📍 Location: N/A
💰 Asking Price: $4,495,000
💼 EBITDA: $1,270,507
📊 Revenue: $14,703,998
📅 Established: 1997

💭 My 2 Cents: This heavy-duty equipment company has carved out a niche assembling custom-built equipment for clients across the western U.S. and Canada. While they generate most of their revenue from selling assembled equipment, they bring in additional income from their partial units, parts, and service lines. I like that they have a highly skilled workforce, well-established client relationships, and a longstanding reputation for quality work. They operate from a 22,050 sq. ft. facility, and the sale includes a huge $1.9M in inventory and $154,000 in FF&E. Right away, I’d want to learn more about the condition and projected use of this inventory and the nature of the equipment in the FF&E. I’d also want to get a feel for the different items they assemble for customers, who their main customers are and what industries they belong in, and how diversified their customer base is (and if there’s any concentration). Since this business is going to be project-based, I’d also need to look into client repeat behavior to understand how often clients come back for additional equipment. The good news is, this business has been around for 27 years, so there should be a lot of repeat revenue regardless.