The cyclical nature of the service and contracting sector is influenced by a number of macroeconomic factors that influence end-user demand. Finding the proper buyer who can effectively manage operations and guarantee long-term growth is crucial due to the technical nature of the position and the operational risk involved in running a successful contracting business. BB Capital Mergers and Acquisitions, the top private market M&A advisory firm in Saudi Arabia, is aware that selling a company is a significant choice. A committed business owner aims to sell their company to a qualified buyer who can carry on the company’s legacy in addition to maximizing the amount of money they can get from the sale. In this field, BB Capital has completed more over 100 valuation and M&A consultancy assignments.

bringing to the table a wealth of deal-negotiating knowledge. Our knowledgeable advisory staff will help your company through the whole sell-side M&A process.

Understanding certain crucial elements unique to the Services and Contracting industry that could affect the possibility of a possible sale is crucial for entrepreneurs and business owners considering a possible sale. These elements influence how appealing a company is to possible investors and buyers.

Skilled Labor: The lack of skilled workers frequently causes problems for many subsectors of the service and contracting sector. As a result, it’s critical to retain highly qualified workers and make sure teams are well managed. Being a part of a reputable and trustworthy labor union can help some companies secure long-term contracts, lower fixed labor costs, and provide the flexibility to scale up or down in response to project needs. Businesses with documented procedures in place are well-positioned in the case of employee turnover, especially in light of the labor shortage. Prospective purchasers are more interested in companies that have automated procedures and reduced reliance on employee-specific knowledge than in those that have not.

Revenue Volatility: Because of the contractual nature of their operations, businesses in the engineering, service, and contracting sectors frequently have considerable revenue volatility annually. Although a single client’s large one-time projects can result in significant sales and profitability increases in any one year, purchasers prefer continuity. Buyers should be wary of both high revenue concentration and high revenue volatility. A seller must be able to demonstrate beyond a reasonable doubt that this trend is likely to continue in order to extract value from this growth surge. A single great year may not justify a higher multiple. In order to verify the company’s growth trajectory, purchasers frequently request historical invoices, current pipeline data, and other documents. Due diligence in late-stage negotiations will be lessened if these reports are organized prior to a transaction.

Long-term Service Agreements: In general, people view businesses that use secure service agreements to generate recurring revenue as less hazardous. By transferring ownership, long-term service agreements boost the likelihood of business success and inspire trust in prospective purchasers. These agreements also facilitate the planning of overhead and make it simpler for businesses to secure acquisition finance. Therefore, it is advised that businesses enter into long-term contracts with suppliers and customers wherever feasible.

Track Record: Businesses with a bad track record and a history of mishaps frequently encounter difficulties when trying to sell. A bad track record affects the business’s capacity to bring in money and land new contracts, both of which can significantly affect profitability. It also makes it harder to retain qualified workers and raises insurance premiums. Both of these have an effect on the valuation. First, a lower valuation results from a lower baseline profit. Second, multiple compression brought on by a lower baseline EBITDA might further diminish a company’s worth. Before making a final offer, buyers frequently give customers a call as part of their due diligence process. A sale could fail due to negative consumer reviews.

Whether it’s a sale or a valuation, our team can offer resources and experience that are only available at larger companies, together with the individualized attention of our M&A Advisory team. Reach out to one of our advisors by contacting us right now.