New Deals: A wastewater treatment company, septic business, and 3 other finds

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NEW DEALS

1/ Wastewater Treatment Company

📍 Location: California
💰 Asking Price: $5,600,000
💼 EBITDA: $1,657,681
📊 Revenue: $5,139,455
📅 Established: 1975

💭 My 2 Cents: This 50-year-old contractor offers custom wastewater and water treatment solutions for industries such as food processing, wineries, and breweries. I really like the built-in demand for their services due to state and local environmental regulations (particularly strict in California) helping drive their consistent growth and great margins. They have in-house talent that designs, manufactures, and installs their own proprietary solutions, giving them a great differentiator from competitors without all these capabilities. I also like that they have multiple employees who will stay post-transaction and can qualify for the needed license to operate the business, so a new owner would have time to get their own if needed. I’d want more detail on the revenue split between their different services, if they have any protected intellectual property or patented products, if they have long-term maintenance contracts or much recurring revenue (common for wastewater treatment contractors), and whether they supply consumables like chemicals and filters that require regular replenishment. Finally, I'd want to better understand what pending or ongoing investments into equipment and technology upgrades should be expected since this can be a capital-intensive business.

2/ Septic Business

📍 Location: Texas
💰 Asking Price: $2,290,000
💼 EBITDA: $792,530
📊 Revenue: $3,819,582
📅 Established: 2015

💭 My 2 Cents: As regular readers know, I include septic companies in my list of great boring businesses because of their straightforward operation, essential services, and consistent, predictable demand. Not surprisingly, I like this well-established business that offers septic system installation, repair, and maintenance. They have diversified but complementary revenue streams, with their new installations helping to build their ongoing maintenance work, and have posted extremely consistent sales and earnings over the past five years. They currently do minimal advertising, so there are also low-hanging opportunities for a new owner to spur further growth. In thinking about growth, I’d want to know how they bring in new clients, who their main competitors are, and what would be involved in expanding their geographic reach. I’d also want to get a handle on the breakdown between their installation and maintenance services, how their maintenance contracts work, the nature and condition of the FF&E included in the sale, and the tenure of the team (since skilled tradespeople can be hard to hire for). If that all checks out, then this deal also has going for it that the seller is committed to spending up to six months hands-on with a new owner. 

3/ Pool and Hot Tub Company

📍 Location: New York
💰 Asking Price: $4,500,000
💼 EBITDA: $1,547,184
📊 Revenue: $3,400,183
📅 Established: N/A

💭 My 2 Cents: This company has been a trusted provider of pool and spa construction and maintenance services for over 30 years. I like that they operate in an upstate New York region with minimal competition, are a home-based business with low overhead, and offer a nice mix of complementary services that helps keep customers long after a first relationship is established. I really like their impressive margins, while their ready scalability means that a new owner investing in further growth could look for some very high returns. They currently also have $300K in ongoing projects and some $400K in FF&E included in the sale (although I would need to check on its condition). I’d want to look into their geographic reach, the terms of their maintenance agreements, if there is much seasonality to the business, if they have any exclusive distribution agreements with suppliers, how they attract new customers, and the size and responsibilities of their staff. Ultimately, demand for pools and hot tubs is increasing every year, especially in high-income areas like this.

4/ Seafood Distributor

📍 Location: New York
💰 Asking Price: $3,000,000
💼 EBITDA: $1,500,000
📊 Revenue: $5,000,000
📅 Established: 23 years ago

💭 My 2 Cents: This seafood distributor specializing in caviar, crab meat, shrimp, and dry and fresh fish has been serving clients nationwide for over 20 years. They also distribute several brand-name food items such as bread, dumplings, kielbasa, assorted cold cuts, and salads. What I like about food distributors is they generally have a lot of long-term contracts in place with clients such as grocery stores, which comes with a lot of repeat revenue. But what really stood out to me with this distributor are the margins, which are significantly above the industry average. I’d want to dig into their contracts with suppliers, retailers, and wholesalers and ensure there is no major vendor or client concentration, which can be a common red flag with distributors. I’d also want to check on the lease terms of their 9000 sqft warehouse and the nature and condition of their trucks to understand any pending capital expenditures. Ultimately, with an asking price of just 2x EBITDA and owners who are ready to retire and sign a non-compete, this seems like a steal of a deal.

5/ Proprietary Heating Elements Manufacturer

📍 Location: Midwest
💰 Asking Price: N/A
💼 EBITDA: $619,520
📊 Revenue: $2,745,411
📅 Established: N/A

💭 My 2 Cents: This decades-old company produces a broad range of proprietary heating elements designed for large-scale industrial applications. I love a manufacturing business like this that furnishes a specialized, niche type of product that can be mission-critical to several large industries, from aerospace to steel. I really like that they serve a B2B market and don’t have clients concentrated in a specific industry, so they aren’t vulnerable to a potential downturn in any one sector. Their clients should also be very sticky, as it can be arduous for a client to shift to a new supplier for a custom part. The business comes with nearly $500K of specialized equipment and they operate in a nearly 30,000 sq ft facility that is available for separate lease or purchase and can easily support expanded operations. Finally, I like that they are SBA pre-approved and the owners are willing to stay on in a limited capacity long term to ensure a smooth transition. However, I’d need to dig into the nature of their proprietary products to include any patents or trademarks they might hold. I’d also want to see detailed financial statements for the past five years to ensure the stability of their sales and earnings and to understand their client trends and purchasing history. I’d finally look to ask how they keep up with the latest technology, if there are any pending capital expenditures, and who their key competitors are.