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Opportunities

HVAC, Steel Erection & Site Prep with 80% Recurring Client Base

Seller will stay on as President or GM for 2 years!

CASH FLOW
$1,771,449

Specifications

  • Price
    $5,950,000

  • Revenue
    $5,594,876

  • Equipment
    $1,036,570

  • Location
    Ridgeville, South Carolina

  • Lease
    $3,000

  • Reason for Sale
    Retirement planning

  • Employees
    22 full time office & field employees

  • Profit Margin
    35%

  • Cash Flow
    $1,771,449

The seller is willing to stay on as President or GM for 2 years! With an 80% recurring client base, this multi-service business offers complete mechanical, electrical, and automation design, installation, and maintenance, as well as steel erection, concrete foundations, design build, and heavy equipment installation. The team is fully capable of running without the owner. They have over 25 active recurring clients from years of service and have a working capital of $200k. They have existing government contracts with the city and department of transportation.

See key highlights below.

  • Not affected by Covid-19 and seeing increasing profit margins in 2020 due to shift in focus from general contracting to niche work (mechanical).
  • 25%-win rate on jobs they bid on due to repeating business
  • Less than 20% of work is new construction
  • No sales team because ~80% of work is from recurring clients, word of mouth and referrals
  • Valuation used 3-year average cash flow making the price favorable
  • Current backlog is $1.3M with historical conversion rates at almost 100%
Priced at $5,950,000 this is a Southeastern company that is in a position to grow in the construction industry with room for expansion into the mechanical side, which currently accounts for only 9% of the business. There will be a 136% return on investment in the first year and net profit after expenses and loan payments will be ~ $1,010,545. 

Business Highlights

Year Established: 15 years
Location: Charleston, South Carolina
Service Area: Within 100-mile radius
Number of Clients: 25+ active recurring clients
Services: Traffic Signals and Security, HVAC, Plumbing, Structural and Steel Erection. General contracting (50%), Electrical (41%), Mechanical (9%)
Building: Four buildings on two acres includes offices, meeting rooms, warehouse, shop and storage space
Lease $3,000 per month- low overhead
Reason for Selling: Retirement planning
Employees 22 full time office & field employees
Seller Training Period: 2 years; willing to stay on as President or GM
Growth Opportunities Expansion into structural and steel erection projects
Current Owner’s Responsibilities Oversees office roles, but team is capable of running the business without him

Financial Highlights

  • List Price: $5,950,000

  • 2019 Cash Flow: $1,769,538
  • A/R: $400,000
  • A/P: $200,000
  • Current WIP: $4,800,000
  • Work in Progress: Average $2,000,000
  • Backlog: $2,00,000

*amounts may vary

 

Cash Flow Analysis

Description of Financial StatementP&L Statement
Jan-Sept 2020
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
20202019201820172016
GROSS SALES$4,196,157$5,478,368$4,384,111$3,571,594$3,526,518
Annualized$5,594,876
Net Income Shown on Financial Statement$1,212,639$1,760,804$1,888,366$448,536$527,182
ADDBACKS
Depreciation$0$2,408$6,543$8,751$16,950
Interest$0$0$862$2,947$4,997
Meals & Entertainment$4,680$4,526$5,121$7,631$6,041
Cell Telephone$1,800$1,800$1,800$1,800$1,800
IRA$8,876$0$0$0$0
Life Insurance$3,592$0$0$0$0
TOTAL ADDBACKS$18,948$8,734$14,326$21,129$29,788
Seller's Cash Flow = Total Addbacks + Net Income$1,231,587$1,769,538$1,902,692$469,665$556,970
Annualized
Profit Margin29.35 %32.29 %43.40 %13.15 %15.78 %
3-year average profit margin: 35%

Services

  • Design Build
  • Concrete foundations
  • Steel Erection
  • Electrical design, installation and maintenance
  • Automation design, installation and maintenance
  • Fiber Optics design, installation and maintenance
  • Mechanical design, installation and maintenance
  • Heavy equipment installation
  • Fabrication
  • HVAC design, installation and maintenance

Assets Included in the Purchase

  • Assets Included in Purchase: $1,130,000

 

  • Heavy Equipment: $126,500 (6) forklift, excavator, scissor lift, etc.
  • Vehicles: $808,720 (22) trucks, digger, crane, etc.
  • Trailers: $101,350 (16) 

Other Assets

  • Included Working Capital: $200,000
  • Intangibles: Stellar reputation the Carolinas with 25+ recurring clients

 

*See additional asset information in the attachments

Valuation Details

The firm Business Brokerage used a cash flow Valuation methodology to determine the Purchase Price of the business.

Cash flow is the sum of business net income plus any owner perks and any non-onward expenses. For this valuation, we used the 3-year cash flow average making the business price much more favorable to the buyer.

The formula used is as follows:

3-Yr. Avg. Cash Flow    x  Prescribed Multiple   =   Fair Market Value

 

With this information, the computation is as follows:

 $1,771,449           x                3.4              =      $6,022,927

Growth Opportunities

Growth opportunities include pursuing more projects in the mechanical side and especially general contracting, structural and steel erection, which currently accounts for only 9% of the business. There are also opportunities to scale business through marketing and advertising as less than 20% of their current business is new work.

Funding Example

Purchase Price:   $5,950,000

 

    12.5%  Buyer Down Payment    $743,750 Must be unborrowed funds
    12.5%  Seller Financing or Equity $743,750 5-year term at a rate of 4.50% = a monthly loan payment of $13,866
    75%Bank Loan $4,462,500 10-year term at a rate of 6% = a monthly loan payment of $49,543

 

  • Cash Flow: $1,771,449

     

  • Annual Payment:

     

    • To Seller: $166,389
    • To Bank: $594,515

       

  • Net Profit (after expenses and loan payment): $1,010,545

Purchase Price:

$5,950,000

$
%
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:
3-year average cash flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
3-year average 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: %

Attachments

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