What's a good multiple on an industrial maintenance company?
October 25, 2024
by a searcher from Queen's University in Kelowna, BC, Canada
Hi there, I'm looking at a Canadian industrial maintenance company with < 1M EBITDA that plays in a space this is very recession proof. Further, my assessment is that when the Canadian dollar is weak, it drives up the price of the downstream commodities affected, which should increase production and hence maintenance work. When the Canadian dollar is weak, it should drive up capital purchase and thus more work with installations.
A few questions:
1) Is my assessment of the above hedge dynamics correct?
2) What's a fair multiple for a business like this?
3) The business is in growth mode and hence, there's a push to value it only on trailing twelve months. What's the group's take on that?
from IESE Business School in Madrid, España
2) An industrial maintenance company is quite sought after due to its recurring revenues. Multiples depend mostly on geography. I don’t know in Canada but in south US multiples could trade up to 7-8x.
3) you must analyze the quality of earnings. If they’re in full growth mode maybe they’ve acquired contracts with little margin and it will show in a few months/years when the weight of those sales are higher.
from University of Southern California in North Palm Beach, FL, USA