Electrical Contractor Multiples
January 30, 2025
by a searcher from The University of Texas at Austin - Red McCombs School of Business in New York, NY, USA
Has anyone transacted or looked at electrical contractors in the last year? I'm trying to get an idea on range of EBITDA multiples for these types of business, both residential and commercial servicing. EBITDA range $500k to $1.5M.
from The University of Texas at Austin in New York, NY, USA
Broker in my particular deal was quoting 4.5x-6.x lol. The anonymous particulars of this electrical contractor are roughly as follows:
-$1.5M EBITDA (so relatively large; and been around for 30 years)
-Concentration risk with top 10 customers accounting for 50% of revenues (yes, commercial)
-Extreme growth in just the last 3 years###-###-#### EBITDA was $500K; 2023 was $1M); makes it hard to lend against
-Servicing almost entirely commercial clients and multifamily; almost no residential
-I bid 4x with heavy structure (about 2x cash straight to seller at close; the rest more or less seller financed); so far haven't heard back even though I still am not sure I would be comfortable trading at this given the volatility in earnings; I would really need to see more of the project pipeline for the next couple years and how accurate they are at predicting costs applied to their bids
-Keep in mind I have not seen a project based pipeline with historical gross margins on a project by project basis; so it's really hard to know whether the current EBITDA level is sustainable or if they just had a knock it out of the year park driven by something else
It sounds like most I've talked to still see these electrical contractors as less appetizing than HVAC/plumbing because of it primarily being project based work rather than service, which is true. I personally think there is a good macro backdrop with all the regulatory requirements for retrofitting buildings and the fact we have continued stress on the grid. But even with that, the traditional service is still very project based and does not show up at the homeowner's residence nearly as often as the plumber or the HVAC guy.
from University of Strathclyde in Melbourne VIC, Australia