❇️ New Deals - 27 Feb 2024

A commercial kitchen maintenance company, asphalt paving company, and 3 other interesting finds.

Author

Helen Guo
February 27, 2024

Hello SMB Deal Hunters!

Thanks for all the great feedback from the deals I shared on Tuesday!

I’m excited to share 5 new deals worth checking out.

But before we continue, I wanted to share an interview I did yesterday with Steve Keller, a successful acquisition entrepreneur who bought a $1.3 million home service business and sold it to PE for $5.8M a few MONTHS later. In the interview, we discuss:

  • How Steve got into acquisitions with zero business background (he was a cameraman previously)

  • How he financed the transaction with only $20k of his own money

  • The one thing he implemented that exploded the business overnight

  • Buying a bigger vs. smaller business

  • And more!

1/ Commercial Kitchen Maintenance Company

📍 Location: Long Island, New York
💰 Asking Price: $3,990,000
💼 EBITDA: $738,943
📊 Revenue: $3,900,000
📅 Established: N/A

💭 My 2 Cents: This company has been helping schools, hospitals, supermarkets, sports arenas, and nursing homes with their commercial kitchen needs for over 40 years. Basically, the way it works is that an equipment dealer sells to a customer and then this company installs it and starts the servicing relationship. What drew me to this industry is that it’s an essential service. If a commercial kitchen breaks down, the only options are to fix it or risk a shut down. For this company, the majority of their work is servicing (75%), which is great because commercial kitchens are governed by strict regulations and thus need to be in tip-top condition so that they can pass any safety inspections. Because these kitchens also go through a lot of wear and tear, they need frequent servicing, which means a lot of repeat revenue. I only have two questions here. Do they have some kind of regular maintenance agreements with clients? And what does the team look like? Otherwise, this is a great opportunity for someone in the New York area with room to grow if you can turn the service business into a subscription model where clients pay a recurring fee for regular inspection and maintenance.

2/ Asphalt Paving Company

📍 Location: Virginia
💰 Asking Price: $1,950,000
💼 EBITDA: $703,740
📊 Revenue: $4,328,742
📅 Established: N/A

💭 My 2 Cents: It doesn’t get much more essential than asphalt paving. Parking lots and roads always need repaving, and they aren’t going to do it themselves. And with the maintenance of critical services like roads and highways especially important for public safety, there’s always going to be a demand for this company’s services. This particular asphalt paver is listed at a really attractive 2.8x EBITDA price, has solid margins, and has been in business for more than 20 years, so they probably benefit from a lot of repeat business and a strong reputation that attracts new clients. It’s also still growing, as it had double-digit revenue growth last year. With a retiring owner who is willing to finance 20% of the transaction, this appears to be an awesome boring and essential business.

3/ Suspended Scaffolding Provider

📍 Location: California
💰 Asking Price: N/A
💼 EBITDA: $727,000
📊 Revenue: $4,100,000
📅 Established: N/A

💭 My 2 Cents: This company operates in the suspended scaffolding business, a market that is poised to grow from $52.8B in 2022 to $72.7B in 2030. This growth is driven by the need for suspended scaffolding equipment in industries from commercial buildings to infrastructure to advertising. I like this because it means the company isn’t reliant on a single industry or client type, although I’d want to confirm that there aren’t any client concentration issues. I also like that the company has close to 400 customers (100 active), an estimated 80% of revenue coming from repeat business, and over 20 years in business, as this means they have an exceptional safety track record. Overall, it looks pretty good, but I do want to know the breakdown of revenue by industry and by rentals, sales, and services (and how margins compare for each), along with the condition and age of the rental equipment.

Want me to help you find a business to buy in the next 90 days and handhold you through closing your first deal?

Apply to Work with Me 👉

4/ CPA Firm

📍 Location: Mid-Atlantic
💰 Asking Price: $5,000,000
💼 EBITDA: $895,260
📊 Revenue: $1,444,422
📅 Established: N/A

💭 My 2 Cents: CPA firms are essential B2B service businesses with lots of recurring revenue and sticky customers (who likes switching their accountant?), which means I absolutely love them. This CPA firm has insanely high 61.2% average adjusted EBITDA margins, minimal client concentration (no client generated more than 3.9% of revenue in 2023), and a very impressive 95% of revenue coming from repeat clients. It also has a staff in place, although it is important with CPA firms to understand the owner’s role and whether they control all the client relationships. If so, you’re going to need them to stay on for a solid transition period. My other questions are over the seasonality of the business, the breakdown of sales by service (auditing, tax preparation, consulting, etc), the firm’s client base (industry focus and client size), the presence of long-term contracts, and how they are finding new customers. I suspect they aren’t fully utilizing digital marketing, so this could be an opportunity to both acquire new customers and expand the company’s geographic reach.

5/ Transportation Services for Car Dealerships

📍 Location: Long Island, New York
💰 Asking Price: $12,000,000
💼 EBITDA: $3,500,000
📊 Revenue: $85,000,000
📅 Established: N/A

💭 My 2 Cents: This company assists car dealerships with transportation and logistics, which is essential for their operations, as their economies of scale are able to save the dealerships a significant amount of money. The margins are low, but there’s a lot of volume in this business (especially with the growth of the online car sales market) and a lot of repeat revenue (car dealers are constantly selling cars and there’s an active used car market). I do want to know how many car dealers they work with, whether they have contracts with these dealers, what client retention looks like, and if there are any client concentration issues, but, ultimately, any business with over $3.5M in EBITDA asking for 3x EBITDA is more than worth looking at.

🐦 The Best of SMB Twitter (X)

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Does it matter for tax purposes if it’s a stock sale or asset sale? (link)

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The difference between 3 vs. 5 year noncompetes (link)

The glass ceiling for home service companies and how to push through (link)

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🤝 Vendors and Lenders

I’m committed to helping the SMB Deal Hunter community close more deals, faster. Click on any of the links below and I will make a personal introduction to folks I trust.

SBA 7(a) Lender: The most common way to finance an acquisition up to $5M purchase price with 10% (give or take) down with the help of a government-backed loan. My preferred lender Elyse will help you out.

Non-SBA Lender: Best for smaller deals if you want to avoid the hassles of SBA. My preferred lender Grant and his team are the only private lenders I know who offer acquisition financing with long payback periods without any collateral requirements. Note: You must have great credit.

Quality of Earnings Provider: I always recommend conducting a QoE during due diligence to uncover any red flags. Get introduced to my preferred QoE provider that offers top-tier financial due diligence without breaking the bank.

Legal Counsel: A must-have on your team to help get a deal to the finish line. Get introduced to legal counsel with experience closing SMB deals that won’t rack up your legal bill.

See you Thursday!

P.S. Whenever you’re ready, here are a few ways for us to work together:

1. Want me to help you find a business to buy in the next 90 days and handhold you through closing your first deal? Apply to work with me.

2. Invest with me in cash-flowing SMB deals. I’m bringing on a select few investors from this community into businesses I’m buying and investing in. Reply “LP” and I’ll share more.

3. Interested in selling your business? I’ll help you connect with buyers from the SMB Deal Hunter Community.

4. Want to promote your business to my community of 45,000+ entrepreneurs and investors? Advertise in SMB Deal Hunter

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Disclaimer

This publication is a newsletter only and the information provided herein is the opinion of our editors and writers only. Any transaction or opportunity of any kind is provided for information only; SMB Deal Hunter does not verify nor confirm information. SMB Deal Hunter is not making any offer to readers to participate in any transaction or opportunity described herein.