❇️ New Deals - 16 Jan 2024

An IT staffing firm, inventory management SaaS, and 3 other interesting finds.

Author

Helen Guo
January 16, 2024

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Hello SMB Deal Hunters!

Thanks for all the great feedback from the deals I shared on Thursday!

I’m excited to share 5 new deals worth checking out.

1/ IT Staffing Firm

📍 Location: Ohio
💰 Asking Price: $2,250,000
💼 EBITDA: $772,991
📊 Revenue: $3,238,045
📅 Established: 1998

💭 My 2 Cents: This is an IT staffing firm with a nice twist: all of the consultants are remote, with 12 of them in the US and 21 in India. The fact they are all remote and the business leverages global talent means it has very low OpEx and as a result runs on solid 24% EBITDA margins. But my favorite part? It enjoys a 100% repeat customer rate and an average client tenure of over 15 years (!). I want to know what the average contract size is and if there are any client concentration issues, but those are absolutely insane stats any way you slice it. I love that the retiring owner is willing to stay on for a year, finance 15% of the purchase price, and roll 15% of the equity. This really shows that the owner has faith in the business and it aligns their incentives with yours. Since they don’t have a sales and marketing function in place, an obvious growth opportunity is hiring a B2B marketer/salesperson to fill the hole.

2/ Inventory Management Software

📍 Location: Remote
💰 Asking Price: $1,500,000
💼 EBITDA: $600,000
📊 Revenue: $1,500,000
📅 Established: N/A

💭 My 2 Cents: Anytime you see a SaaS business selling for 2.5x SDE, you should stop and take a look. This particular SaaS is in the inventory management space, and they have some really large corporations as clients, which means it’s probably legit. It’s definitely intriguing, and the price is obviously very attractive, but I have a lot of questions. What is client churn and LTV? What’s the team like? Who is their ideal customer profile? How do they acquire said customer? And what is their average contract size? If the answers to those questions turn out ok, then this business could really be a steal at this price (and the seller is also offering financing!).

3/ Assisted Living with Real Estate

📍 Location: Minnesota
💰 Asking Price: $7,900,000
💼 EBITDA: $1,732,958
📊 Revenue: $4,018,303
📅 Established: N/A

💭 My 2 Cents: This is a collection of seven assisted living locations with 38 beds in total. The margins on this business are absolutely nuts, and of these 38 beds, 36 are currently occupied, so there is obviously some strong demand. The real estate is included in the asking price, so you can use that to leverage for financing. I also like that the owner is absentee and the staff and director are fully trained, making this a true turnkey operation that won’t require you to make additional hires to replace the owner. I’d want to better understand how this specific business is landing clients (I’d bet a lot are through referrals from doctors and word of mouth) but with how fast the US is aging (the number of Americans age 65 or older will more than double over the next 40 years), I wouldn’t be surprised if the new owner ultimately ends up with more than seven locations.

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4/ Accounting Firm

📍 Location: Connecticut
💰 Asking Price: N/A
💼 EBITDA: $1,019,019
📊 Revenue: $2,642,000
📅 Established: 1980

💭 My 2 Cents: I love accounting firms for two main reasons. First, they are an essential business service, which makes them very recession-resistant. Second, they come with heaps of recurring revenue. This accounting firm has served public companies, private companies, and nonprofits for over 40 years, which tells me that they probably have strong longstanding relationships and a good reputation in the area. This is especially important in accounting because companies often prefer accountants in their area (easier to meet and be in the same timezone, understanding of local regulations, and community ties). In this regard, the existing staff of 13 is especially important, which means it’s very important to know how long they’ve been around and their willingness to work with a new owner. I also want to know what client retention looks like and what the average contract size is, as well as what the current owner's role is in the business. Overall, this looks like a good boring business, and in Connecticut you don’t need to be a CPA to own an accounting firm.

5/ HVAC Company

📍 Location: Nebraska
💰 Asking Price: $5,950,000
💼 EBITDA: $1,398,667
📊 Revenue: $4,572,885
📅 Established: 2010

💭 My 2 Cents: Speaking of good boring businesses, it doesn’t get much better than a strong HVAC company. They’re a recession-resistant essential service and the realities of climate change are making HVAC service become even more of a necessity. No wonder they are hotbeds of PE investment. This HVAC company gets 50% of its revenue from residential customers and 50% from commercial customers and it has the largest market share in the county, which is great. It also has 150 to 200 maintenance contracts (recurring revenue!) and nearly $3M of likely projects already scheduled for 2024. I also like that there are technicians in place (but I wonder how long they’ve been around since it can be hard to hire skilled labor) and that the owner is retiring. Things look pretty good on the surface here, but I’d want to know what the maintenance contracts look like (contract size, length), renewal rate on the contracts, and how long their clients have been around for.

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Disclaimer

This publication is a newsletter only and the information provided herein is the opinion of our editors and writers only. Any transaction or opportunity of any kind is provided for information only; SMB Deal Hunter does not verify nor confirm information. SMB Deal Hunter is not making any offer to readers to participate in any transaction or opportunity described herein.