ACQUISITION IN WATER AND SEWERAGE PIPE MAINTENANCE SPACE

Hey SF,

I am looking at a deal in the Water and Sewerage Pipe Maintenance Space and wanted to check if anybody had any familiarity/expertise within the space?

Target is a regional player with decent clientele, some contracted revenues, above-average industry margins (appx. 20%) based on seller discretionary earnings) and low debt. They also have underground electrical wires maintenance contracts (ISP /telcos) but that forms <15% of the revenues.

One possible red flag for me was the lack of middle management in the company - CEO and COO are majority shareholders (both looking to exit for non-business reasons but COO is willing to stay on for 9-12 months) and both are very involved in the sales and tendering process. Also noticed the company is quite 'asset light' as most machinery and equipment is leased/hired as per the requirement of the projects. Is that normal?

What are the other major considerations / red flags to delve into during the initial due diligence process before getting an LOI out?

Any thoughts or insights would be thoroughly appreciated.



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