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Commercial HVAC, Plumbing & Sheet Metal Fabrication w/ 70 Employees

Year-over-year sales growth since 2017!

CASH FLOW
$1,674,771

Specifications

  • Price
    $7,750,000

  • Revenue
    $12,748,699

  • Profit Margin
    15%

  • Location
    Sacramento Valley California

  • Service Area
    Northern California

  • Reason for Sale
    Strategic roll up/industry consolidation

  • Lease
    22,000 sq. ft.: 2,000 sq. ft. office, remaining is warehouse and storage, large roll-up doors

  • Employees
    70: Controllers, foremen, project managers, assistant, field and shop workforce

  • Equipment
    $685,000

This HVAC and plumbing company in Northern California has seen year-over-year sales growth since 2017%!  Serving the Sacramento area since 2003, they complete HVAC (70%) and plumbing services (30%). With an on-site fully automated sheet metal fabrication shop, the company is capable of manufacturing ductwork up to 14 gauge, plumbing and piping, as well as architectural sheet metal and flashings. There are 70 employees on staff, including controllers, foremen, project managers, assistants, and a field/shop work force.  The owner has built a solid customer base with a focus on serving schools, government institutions, and commercial office buildings, and many customers have been with this company for over fifteen years.  The owner currently focuses on lead generation, some estimations, bonding, and general oversight of the business.

 

Operations are managed from a large 14,000 square foot location in the Sacramento Valley area.  The office has 2,000 square feet of space with a reception area, private offices, and staff spaces.  The remaining 12,000 square feet is dedicated to warehouse, storage, and the fabrication shop. 

 

Priced at $7,750,000, there is huge potential for continued growth and success. The industry in Northern California always has room for expansion and the company could take on additional available work in the region.  Another area for development could be found in adding a service department and considering the implementation of maintenance and inspection contracts.

Business Highlights

  • Year Established: 2003
  • Location:  Sacramento Valley California
  • Service Area:  Northern California
  • Services: HVAC (70%) and plumbing (30%)
  • Clients: Educational institutions, government institutions, commercial office buildings
  • Lease: 22,000 sq. ft.: 2,000 sq. ft. office, remaining is warehouse and storage, large roll-up doors
  • Reason for Selling: Strategic roll up/ industry consolidation
  • Personnel: 70: Controllers, foremen, project managers, assistant, field and shop workforce
  • Seller Training Period: Two years
  • Growth Opportunities: Consider maintenance and inspections contracts, expand service area
  • Current Owner’s Responsibilities: Oversight, no labor or bidding

Financial Highlights

List Price: $7,750,000

  • Cash Flow:
    • 2019: $1,674,771
  • Assets Included in Purchase:
    • Equipment: $187,000: Tools, equipment, furniture, fixtures, storage racking, workshop
    • Vehicles: 18:$498,537 
    • A/R: $2,600,000
    • Secured Work: $3,000,000        
    • Pipeline: $5,500,000

*amounts may vary, assets may be depreciated, replacement cost, or fair market value 

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-July Accrual
P&L StatementTax ReturnTax ReturnTax ReturnNotes
20202019201820172016
GROSS SALES$7,436,741$11,496,912$8,564,656$7,328,072$6,361,133
Annualized$12,748,699
Net Income Shown on Financial Statement$2,128,000$1,543,340$512,536$824,829$341,519
ADDBACKS
Depreciation$0$12,400$8,767$5,032$7,203
Interest$2,513$33,289$16,864$-402$2,520
Meals & Entertainment$211$27,762$16,804$22,649$12,152
Non-Business Telephone$280$480$480$480$480$40/month
Auto-Personal Use$1,750$3,000$3,000$3,000$3,000$3,000/year
Insurance Premiums for Owners: Health, Life, Auto$14,000$24,000$24,000$24,000$24,000$2,000/month
Other$0$0$8,553$0$0One time investment expense
Rent$17,500$30,000$30,000$30,000$30,000
Contributions/Donations$0$500$0$0$0
TOTAL ADDBACKS$36,254$131,431$108,468$84,759$79,355
Seller's Cash Flow = Total Addbacks + Net Income$2,164,254$1,674,771$621,004$909,588$420,874
Annualized
Profit Margin29.10 %14.57 %7.25 %12.41 %6.62 %
  • Profit margin: 15%

Clients

  • Educational institutions
  • Government institutions
  • Commercial office buildings

Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

Services


Personnel

Total Personnel: 70

  • Controllers
  • Foremen
  • Project managers
  • Assistant
  • Field workforce
  • Shop workforce

Growth Opportunities

  • Add service department
  • Consider maintenance and inspections contracts
  • Expand service area
  • Take on additional available work

Valuation Details

 

 

The Firm used a cash flow valuation methodology to determine the purchase price of the business. 

The formula used is as follows:

Cash Flow       x          Prescribed Multiple     =          Fair Market Value

Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.

A prescribed multiple is determined by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiplier.

For this business, a 2019 cash flow was used with a prescribed multiple is 4.65.  With this information, the computation is as follows:

Cash Flow           x  Prescribed Multiple     =   Fair Market Value

 

With this information, the computation is as follows:

 

$1,674,771            x                4.65                 =    $7,787,685

 

Funding Example

 

Purchase Price:   $7,750,000

 

    12.5%Buyer Down Payment    $968,750 Must be unborrowed funds
    12.5%Seller Financing or Equity $968,750 5-year term at a rate of 4.50% = a monthly loan payment of $18,060
    75%Bank Loan $5,812,500 10-year term at a rate of 6% = a monthly loan payment of $64,531

 

  • Cash Flow: $1,674,771

     

  • Annual Payment:

     

    • To Seller: $216,725
    • To Bank: $774,368

       

  • Net Profit (after expenses and loan payment): $683,678

Purchase Price:

$7,750,000

$
%
OR
$
%
OR
$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
2019 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2019 Cash Flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

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210 N 78th St. 2nd Floor
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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.