The nature of operations and the industry’s cyclicality make the construction and engineering sectors vulnerable to a number of risks. The necessity to locate the proper buyer who can successfully take over operations and assure long-term growth is highlighted by the high industry-specific risk and the technical nature of the roles involved. 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.

Our experienced advisory team will assist your business in navigating the entire sell-side M&A process.

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.

Revenue Volatility: Because of the contractual structure of their activities, businesses in the engineering and construction sectors frequently face significant 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 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 before a transaction.

Cyclicality: Businesses that have diversified manufacturing and industrial production or are exposed to the construction sector are subject to cyclicality. This implies that the health of the economy and macroeconomic variables like interest rates, commodity prices, construction spending, disposable income, and business sentiment may have an effect on these enterprises’ revenue and profitability. When a buyer is selling a firm during a recession, it’s critical to comprehend the risks related to the industry and business model of the organization. The company’s product and service portfolio can be diversified to reduce such risks. Businesses can lessen their exposure to a specific industry by doing this. Maintaining steady revenue and profitability can also be aided by having safe, long-term contracts and agreements with clients.

Machinery and Capex: The engineering and construction sectors require a significant amount of cash. Project delays and excessive maintenance expenses might result from equipment faults and breakdowns. In severe cases, this may even result in lost sales, harm to one’s reputation, and a loss of clients as a result of the inability to perform. To meet short-term capital obligations, a business must always have adequate liquidity. Making sure the new buyer won’t need to make large capital expenditures after taking over the company is crucial during a sale. Furthermore, any unnecessary assets that don’t bring in money can not contribute to the growth of the company’s worth. In order to increase the value of the company when it is sold, business owners should sell off such unnecessary equipment and assets and use the money raised to expand their company.

Track Record: No buyer is interested in purchasing a business with a bad track record and a history of mishaps. This affects the business’s capacity to earn income and land new contracts, but it also raises insurance premiums and makes it harder to keep qualified employees.  These elements may significantly affect profitability, which in turn affects the company in two ways. 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. As a result, the business needs to be operating at its best both before and during the sale process.

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.