Experience in acquiring an electrical contractor?

September 18, 2024

by a searcher from Pennsylvania State University in Nashville, TN, USA

I'm under LOI with an electrical contracting company (~$5M revenue) that primarily does residential new build installations and some service work as well. I'm curious if anyone would be willing to share their experience in acquiring (successfully or not) a company like this. Specifically, I'm interested in what to scrutinize behind the licensing (which I know is state dependent), cyclicality, margins/cash flow, customer contracts, but I would be curious to hear opinions on anything else that I may want to dig into during diligence. Any advice is appreciated. And of course, if you've done an acquisition like this and would be willing to connect offline to share your thoughts I would certainly take you up on that. Thanks in advance, Nick

Reply by a searcher
from University of Wisconsin in Hopkinton, MA, USA

^redacted‌ — late to the post but paying close attention to key man risk is important. These businesses revolve around 1-2 key people and crews underneath them. Customers come and go, especially if the service portfolio is 10-20% of the overall revenue. An equity stake is likely an outcome for key personnel post-transaction to lock up these folks for you investment horizon.

Reply by an intermediary
in Campbell, CA, USA

I currently have an electrical contractor for sale in California. Rules of thumb: (As a percentage of annual revenue) COGS 55%-65%, Labor Costs 30%-35%, Pretax Earnings 6%-10%. Seasonality mid-spring through mid-fall. Revenue per employee $200k. Staff positions and experience? Do they often hire temp workers? Backlog by time and dollars? Repeat customers? Size of customer base? Current bids working on and submitted? Job cost detail? WIP?

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