New Deals: A municipal water department compliance agency, residential and commercial landscape business, and 3 other finds

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NEW DEALS

1/ Municipal Water Department Compliance Agency

📍 Location: Tampa, Florida
💰 Asking Price: $6,500,000
💼 EBITDA: $1,333,233
📊 Revenue: $2,024,411
📅 Established: 1998

💭 My 2 Cents: This company provides compliance services to municipal water departments nationwide, specializing in creating and distributing the Consumer Confidence Reports mandated by U.S. safe drinking laws. Because they cater to government clients and produce materials that are federally mandated, they have a high average contract value of over $5000, an amazing 97% client retention rate, an average customer lifetime value of over $80K, and awesome margins. They have also found a great niche market where they are operating very efficiently, so it is likely that competition is low and their customers are clearly sticky. Beyond this, you can see multiple tailwinds on the horizon as recent federal legislation will require all water departments to submit two reports a year instead of the current one and AI could push their operational efficiency even higher. However, even with all this praise, I’d need to look into a few things. I’d want to check their performance for the last five years just to confirm their numbers, and I’d be curious as to what their payment cycle is like and if there is any seasonality linked to their required reports. I’d also want to better understand how they acquire new customers, what competition they currently face, who holds their key customer relationships, and what will be involved in maintaining these post-transition.

2/ Residential & Commercial Landscape Business

📍 Location: Napa, California
💰 Asking Price: $2,745,000
💼 EBITDA: $850,000
📊 Revenue: $2,944,182
📅 Established: 1990

💭 My 2 Cents: While I like landscaping businesses in general, it’s even better when they’ve carved out their own niche, as this company has with their top-tier landscape and estate management services to a discerning clientele in Napa Valley. I like how their business model fits their wealthy locale and how they differentiate themselves by using the very best tools, products, and organic practices. Given the high-end level of service they provide, I would assume their customers are very sticky and have a high lifetime value. I also like that they have 25 employees and nearly $550K of FF&E. While their location in many ways is ideal, Northern California can pose both extreme weather conditions and changing regulatory requirements, so I’d want to know how these might have affected their performance in the past. I’d need to get a handle on the size of their client base and if there are any concentration issues, the revenue split between their different services, the terms and duration of their standard contract, the level of recurring revenue, and how they gain new clients. I’d also need details on the FF&E and, last but not least, I’d want to see if they take care of any vineyards and, if so, if there are any special requirements involved. Overall, this could be a very nice way to get into the landscaping business.

3/ CNC Precision Machining Shop

📍 Location: Union County, New Jersey
💰 Asking Price: $1,200,000
💼 EBITDA: $444,244
📊 Revenue: $2,806,208
📅 Established: 1967

💭 My 2 Cents: This company makes customized parts for clients predominantly in the aerospace and defense industries. I love how they have been family owned since they were started in 1967, as this commitment to the business has let them build both a stellar reputation and a loyal customer base. It takes time and effort to obtain the necessary qualifications and certifications necessary to cater to their clients, many of whom are formally approved preferred suppliers certified by NADCAP, so they should have a leg up in both keeping their clients and discouraging potential competitors. I also like that there is $645K of FF&E included in the asking price, with this highly specialized equipment representing another important barrier to entry. I’d need to get a feel for the business’s hundreds of products, whether any SKUs make up an outsized proportion of revenue, the extent of possible customer concentration issues, and if there are challenges dealing with suppliers or sourcing certain materials. Precision manufacturing requires a skilled team, so I’d need to check on the qualifications and experience of their staff and, given their involvement with aerospace and defense industries, what would be involved in transferring their key licenses post-sale. While this deal already has a lot going for it, I always like it when the hard assets included make up a large portion of the purchase price (as you still have value if all else fails). Add to this that the owner is offering a one year transition period to help ensure the business continues to thrive, and this deal looks awfully good.

4/ Veterinary Hospital and Clinic

📍 Location: Los Angeles County, California
💰 Asking Price: $2,495,000
💼 EBITDA: $530,000
📊 Revenue: $1,500,000
📅 Established: 1955

💭 My 2 Cents: Animal care is a fantastic space to be in as people are willing to spend top dollar for their beloved fur babies, making veterinary care an absolutely essential service that isn’t susceptible to market fluctuations. This veterinary clinic and hospital has been in operation for an impressive 60 years and AAHA accredited for nearly 25 years, has an experienced staff in place, and boasts higher than industry average operating profits. I really like how they’ve become a mainstay in their community, as this translates into an extensive list of long-standing customers. And if there aren’t any issues with service quality, people generally don’t change their veterinarians unless they move away. I’d want to look into the relative financial performance of the clinic and hospital, why they are able to achieve higher margins, the licensing requirements to operate the business, the competition in their area, and their current marketing efforts. I’d also need to know if there are any challenges in finding and retaining key staff and how much you would need to expand the current staffing to support expansion efforts. There is some $315K in specialized equipment transferring in the sale and an option to purchase the real estate if desired, making this deal even more appealing to someone looking to get into or expand in the animal care industry.

5/ HVAC Company

📍 Location: Las Vegas, Nevada
💰 Asking Price: N/A
💼 EBITDA: $1,300,000
📊 Revenue: $4,000,000
📅 Established: 1992

💭 My 2 Cents: This company provides a full suite of HVAC services within a 250-mile radius of Las Vegas. What immediately stands out is that in an industry known for its steady profitability, they generate an awesome $2M in cash flow and some seriously impressive margins. I really like how the city’s various hotels and casinos help drive their revenue numbers while keeping them busy year-round. They have the scale to support this volume of work, with 60 technicians and support staff and $350K of equipment that includes a commercial fleet of 20 vehicles (incorporated in the asking price). A large part of their sales come from referrals, so a new owner looking to expand should definitely be able to do so based on a more robust marketing strategy. I’d need more detail on the breakdown between their installation and maintenance work, their standard contracts with their hotel and casino clients, the level of their repeat business and recurring revenue, any client concentration issues, and the extent of their competition. I’d also want to check on the condition and useful life of the FF&E, what would be involved in transferring their current facility to a new owner, and how important the current owner is to daily operations and what would be involved in replacing them. I’d finally want to ask what the advantage is to their current service area being so wide. Ultimately, this is a classic boring business with some major league profitability.