At what multiple, if any, do project-based cyclical businesses make sense to buy?

searcher profile

August 16, 2025

by a searcher in Knoxville, TN, USA

A broker sent me a commercial new-build subcontractor. Business revenue is 90% project-based contractual work. EBITDA 800-900k range at just above 3 times asking price. The fact that it was a project-based business tied to construction and regional cyclicanlties was enough for me to say no, but I wanted to look at the CIM just to get reps. They have been in business for 30+ years. The owner has clean books for 20+ years and very steady growth. They have contracts in place exceeding 1 years revenue and are in a rapidly growing region. Middle management and a salesperson in place with a motivated owner offering 250k working capital included. The more I read the better it seemed to me. At what multiple does a business like this make sense taking a risk on? 2.5x? 2x? I know more goes into an acquisition than multiples but wanted to hear opinions and experiences?
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Reply by an investor
from University of Pennsylvania in New York, NY, USA
It depends on how levered the business would be and what your time horizon is. A cyclical and project-based business doing ~$800k of EBITDA could very quickly be breakeven (or worse) if a downturn occurred due to negative operating leverage. ~3x doesn't seem too off-market, but you'd likely want to conservatively finance a deal like this and prep for the worst from a cash / balance sheet perspective in the first few years to minimize the risk of defaulting on any loans. If you're financing the deal yourself or have aligned investors who are comfortable holding a business like this through cycles, then it could be a great outcome from a returns perspective (provided you're able to continue refilling the sales funnel!)
commentor profile
Reply by an intermediary
in Knoxville, TN, USA
Hi Curtis, havinge been a part of a small, cyclical company acquisition in the past, I would heavily consider the seller's role and how dependant the relationships and future contracts are on the seller. If you do pursue the deal, we have some due diligence tools to analyze project based companies, so feel free to reach out.
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