Dru and Gold Coast Business Broker Rod Jessen recently had a discussion about key considerations when taking a civil business to market in Australia. Both Rod & Dru are experienced in selling civil operations and their chat had some great insights for prospective sellers. Some key takeways were:

Business Valuation – Plant & Equipment Heavy

In a lot of circumstances, the majority of the sale price for a civil company will plant and equipment value. For this reason, it is important that plant is in good condition with regular and thorough maintenance programs.

Business Valuation – Weather Variability

Civil businesses that come to market typically have highly variable financials when compared to other industries. This is due to the varying impact of weather on operations between years. For this reason, a more than normal amount of financial years are considered when calculating the business valuation to help gauge what an acquirer could reasonably expect in future sales. 5+ years instead of 3.

Although multiple years are considered in civil business valuations, the most recent year still generally carries a lot of weighting with a potential acquirer. This is something to keep in mind for prospective sellers. Listing after a better than average year is more favourable than going to market after a year that had more than the average amount of inclement weather.

Key Consideration – Local Property

In civil, many council/shire contracts are awarded to operators who are ‘local’, defined as operators who own freehold property within or adjacent to the shire that they’re tendering in. This is something that is considered by buyers when assessing a deal. Does the business come with a freehold in key shires? Does the business have a track record of winning work outside of its ‘home base’?

Key Consideration – Management Structure

The vast majority of civil businesses that come to market are highly reliant on a key person. Often an owner-operator who has build the business up from nothing over 20+ years. Unfortunately this situation is not very attractive for buyers who wonder what will happen once the key person is no longer around. Will day to day operations be hampered, will contracts based on a personal relationships be lost?

Much more attractive to the market is a civil business which has a quality, well-established general manager in place where the exiting owner has a minimal role in day to day operations. A common structure to secure a quality general manager particularly in more regional locations is to offer then a percentage share of profits. This is typically no issue for potential acquirers who consider this well worth it to have an investment that’s run under management.

Buyer Profile

The most common acquirer of civil businesses is industry buyers. Typically either a like for like civil business who is looking to grow into a new location or grow their market share or a different type of civil business who is looking to diversify and grow. An example being a civil rail company acquiring a civil plumbing company.

Do you have a civil business that you’re contemplating exiting? Book a complementary and obligation-free consultation with one of our brokers today.