New Deals: A commercial and residential fencing contractor, facilities management company, and 3 other finds

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NEW DEALS

1/ Commercial & Residential Fencing Contractor

📍 Location: Florida
💰 Asking Price: $3,250,000
💼 EBITDA: $923,482
📊 Revenue: $3,476,737
📅 Established: 2002

💭 My 2 Cents: I’m a fan of the fencing business as people’s need for security means there’s always a demand for quality fencing. I like that this contractor has been in business over 20 years, indicating an excellent reputation and solid client base, and that they do both commercial and residential work, as this gives them two different revenue streams. I’d want to better understand the breakdown between their commercial and residential revenues, who their key clients are, how they acquire new customers, and what competition they face. I’d also need to know if there’s any seasonality to the business, what their licensing requirements are, the experience and qualifications of the staff, and how involved the owner is day to day and what would be involved in replacing them. There could be some real growth potential here, so I’d finally want to look into what opportunities exist for expanding their services or geographic reach. In addition to their really strong margins and reasonable asking price, this business could provide a new owner a ready way to enter the industry without a huge initial capital commitment, as the seller is offering financing for 10% of the purchase price which, coupled with an SBA loan, could result in a very appealing down payment for the significant amount of cash flow you’d be acquiring.

2/ Facilities Management Company

📍 Location: Indiana
💰 Asking Price: $4,500,000
💼 EBITDA: $935,000
📊 Revenue: $12,500,000
📅 Established: 1990

💭 My 2 Cents: This majority women-owned company manages federal government buildings nationwide, which I really like because these contracts can be hard to win, but once awarded they can be quite sticky. This is seen in how they currently have signed contracts representing an impressive $30M of future value. I also like their 30+ years of longevity, low overhead with few fixed costs, and that they are run entirely from home, with equipment stored at the individual buildings they serve. Given their importance, I’d want to really focus on the nature and scope of their contracts. I’d need to get a detailed understanding of their standard terms, who the counterparties are, how often they renew, if they are transferable, and, importantly, how far into the future the $30M of contract value extends. I’d also be curious how often they add or lose facilities, who their main competitors are, the roles and experience of their staff, and what would be involved in replacing the responsibilities of the current ownership. If everything checks out, this could be a great boring business with an extremely stable revenue base.

3/ Internet Marketing Agency

📍 Location: Monmouth County, New Jersey
💰 Asking Price: $3,800,000
💼 EBITDA: $901,591
📊 Revenue: $2,073,718
📅 Established: 2004

💭 My 2 Cents: Digital marketing agencies are great, but there’s a lot of them out there. The key is to find one that has differentiated itself. This particular agency does so by offering full suite of services at an exceptional level, resulting in a prestigious reputation. I like that it has consistently for decades generated multi-million dollar revenues, as this indicates that they have been able to keep up their level of service despite a changing landscape. I also like that it has very strong 43% profit margins, which provides a solid foundation from which to expand. It’s also nice that they are home-based with eight employees, that they have won certificates, and that they have a strong client list. Clients are really important in this industry, so I’d want to dig into who they are, how long the average relationship is, what the average life time value is, customer acquisition cost, and churn are, and how they are acquired. I’d also want to know the average project scope in terms of length and value, how much of the revenue is recurring, what percent of projects is retainer based versus one-off, detailed financial information from the past five years, and each employee’s skll set, role, longevity, and likelihood of sticking around. Finally, I’d explore whether the current limiting factor is capacity constraint or lack of client interest, their systems and processes regarding operations and cost management, their approach to adapting to new trends and technologies, and who their key competitors are.

4/ Uniform Retailer with Custom Embroidery and Silk Screening

📍 Location: Florida
💰 Asking Price: $2,000,000
💼 EBITDA: $612,572
📊 Revenue: $1,790,000
📅 Established: 1994

💭 My 2 Cents: This uniform retailer has been serving both private and public entities for over 30 years, with a very nice 60% of the revenue of the recurring variety. I like that it’s a simple business that’s withstood the tests of time. I also like that it’s SBA pre-qualified, comes with seven experienced employees, and comes with $125,000 of FF&E and $250,000 of inventory. For me, the most important thing is to understand exactly who their clients are and what the orders look like. There is a big difference between a storefront that offers custom printing and a large corporate supplier. You’ll need to find out which category this business belongs to. I also want to know what the recurring contracts look like, who the clients are, what exactly is being supplied, how much of the revenue is from each line of the business, and the split in revenue between walk in traffic and online sales. Finally, I’d need to know the split between corporate and individual customers, the consistency of their financial performance, the role of the current owner, whether the employees are staying on post-transition, who the key competitors are, the current marketing plan, their relatonship with suppliers, and their pricing power with customers. It’s admittedly a lot of questions, but if it all checks out, then this could be a stable and secure cash-flow machine.

5/ Waste Management Company

📍 Location: Peyton, Colorado
💰 Asking Price: $3,300,000
💼 EBITDA: $472,115
📊 Revenue: $1,303,000
📅 Established: 2016

💭 My 2 Cents: There’s nothing better than a boring business with recurring revenue, and this waste management company certainly fits the bill. In 8 years, this business has grown from zero to 2,300+ customers that are served weekly or biweekly, making it the largest trash company in eastern El Paso County. While the asking price may seem high at first glance, note that it includes $2M in FF&E. That said, I’d want to verify the condition of the trucks, dumpsters, and other assets (and understand how utilized they are). I’d also want to understand what additional capital expenditures are expected with their current growth trajectory. In addition, I'd want to know what growth has looked like over the past three years, what the split between administrative roles and drivers is, and what the acquisition cost, lifetime value, average length of relationship, and churn for clients are. Finally, I’d want to explore what opportunities exist for expanding the business’s geographic reach, especially since this business is serving a growing area of Colorado Springs. With a retiring owner who just turned 70, this seems like a great time for a new owner to take over and bring new energy to the business.