$11.0M
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For Sale: U.S. Specialty Construction Contractor, with Large Gov. Backlog. $140M Revenue, Construction Contractor for Sale. Adjusted EBITDA $10M - $14M (TBD) Established: 20 + Yrs. Location: USA Assets: $65M appraised equipment, subject to $4M debt, Real Estate: $4M Backlog: $135M+ Primarily...
Why we like it
- Earnings Quality: $10-14M EBITDA on $140M revenue delivers solid 7-10% margins in a notoriously low-margin industry. The government contract focus means predictable payment terms and lower collection risk compared to private commercial work.
- Durability & Moat: $135M backlog represents nearly 12 months of forward revenue coverage, providing exceptional visibility in a typically project-driven business. Specialty government work creates switching costs and relationship moats that are hard to replicate.
- Market Tailwinds: Government infrastructure spending continues at elevated levels, and specialty contractors with security clearances and established relationships benefit from limited competition. The 20+ year track record demonstrates staying power through multiple economic cycles.
- Operator Advantage: $61M in net equipment assets provides operational leverage and competitive advantages. The asset-heavy nature creates barriers to entry while generating depreciation tax benefits that improve after-tax returns.
How to improve it
- Backlog Acceleration: Analyze the $135M backlog composition by contract type, margin profile, and timeline to identify opportunities for faster execution. Focus resources on highest-margin projects first to maximize cash conversion in year one.
- Equipment Utilization: Audit the $65M equipment portfolio to identify underutilized assets that could be redeployed to higher-margin projects or divested. Target 85%+ utilization rates across core equipment categories.
- Bid Pipeline Expansion: Leverage the established government relationships to pursue adjacent contract opportunities and increase bid win rates. Focus on contracts that utilize existing equipment and capabilities to minimize incremental investment.
- Cost Structure Optimization: Review labor allocation across projects to ensure optimal crew deployment and reduce idle time. Implement project management software to improve scheduling efficiency and reduce overtime costs.
- Working Capital Management: Negotiate more favorable payment terms with government clients and implement progress billing optimization to accelerate cash collection. Target 30-day improvement in cash conversion cycle.
- Margin Enhancement: Identify opportunities to move up the value chain within specialty government work, potentially adding higher-margin services like project management or specialized consulting. Focus on recurring revenue streams where possible.
- Geographic Expansion: Evaluate opportunities to replicate the government contracting model in adjacent markets or regions where similar work is available. Use existing relationships for warm introductions to new government entities.
Diligence notes
- Contract Concentration: Verify the composition of the $135M backlog by client, contract type, and cancellation terms. Ensure no single contract represents more than 20-25% of total backlog to avoid concentration risk.
- Security Clearances: Confirm all necessary security clearances are current and transferable, as these create significant competitive moats but can be lost during ownership transitions. Understand renewal timelines and requirements.
- Equipment Condition: Conduct thorough inspection of the $65M equipment portfolio to validate appraisal values and identify any major maintenance or replacement needs. Verify that equipment matches current project requirements.
- Regulatory Compliance: Review all government contracting compliance requirements, certifications, and audit history. Ensure no outstanding issues that could impact future contract eligibility or backlog execution.