Acquisition Multiples for Sheet Metal Roofing businesses?
August 04, 2023
by a searcher from Indiana University, Bloomington/Indianapolis - Kelley School of Business in Chicago, IL, USA
Hi All,
I'm looking at a business that does both Sheet Metal Manufacturing and Roofing Contractor work (25% / 75% respectively). It does ~$2.5m EBITDA / $3.25m SDE. I've done a fair amount of research that would suggest 2.75x - 3.5x EBITDA is an appropriate valuation range. Does anybody have insight into how accurate this range is? Relatedly, if I can successfully scale the business to $5m+ EBITDA, how much (if any) multiple arbitrage might exist on the backend? My research seems to indicate that I should not expect much value arbitrage on the back end, even if I successfully 2x business over the course of ownership.
Any thoughts would be welcome! Thanks so much!
from Brigham Young University in Kahului, HI, USA
What is the make up of the roofing revenue sources? New construction vs retrofit vs. repairs and maintenance? Commercial vs residential? There is a reasonable difference in marketing to B2C vs B2B clients.
What % of the manufacturing is done for other clients vs. in house projects? I would think there is a healthy difference in valuing a "sheet metal roofing manufacturer" that sells to the public/industry vs. a roofing company that manufactures it's own product.
From my perspective, the reason for an increase in valuation multiples has to do with buyer pools. The smaller the multiples, the smaller your buyers, and the more limited their resources. They are also likely dependent on SBA or bank financing that comes with DSCR and other ratios that will limit the multiples that can get financed. As SDE gets larger, you attract larger fish that have the capacity to pay higher multiples. I don't know where this tipping point is for this industry, but in the other industries that I have considered, it is between $1 and 3M in earnings. So I would think this business is already of the size to attract your most competitive buyers?
from Oregon State University in Kuna, ID, USA
https://www.searchfunder.com/bvr/sector/283
https://www.searchfunder.com/bvr/sector/473
Please let me know if you have any questions or if you would like to dive deeper into the data. Happy to help.