Does anyone have experience acquiring capital intensive businesses?

searcher profile

February 19, 2026

by a searcher from Stanford University - Graduate School of Business in San Francisco, CA, USA

I am curious to learn more about the potential for search in infrastructure services companies that may require more capital in the initial investment.
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commentor profile
Reply by an investor
from Columbia University in Fairfax, VA, USA
Capital intensive businesses are a different ballgame. CapEx and Working Capital matter in any deal - but incredibly critical to get right with these types of businesses (especially if you're putting debt on the company), because: A) These businesses often carry meaningful WIP, which is one of the more trickier elements when diligencing / normalizing Net Working Capital. Increases the risk of negotiating a bad NWC peg and either unknowingly overpaying at close or running into liquidity issues post-close. B) Your standard profitability metrics (e.g., EBITDA) are effectively meaningless, so you'll need to underwrite true cash flow by factoring in Maintenance CapEx (and separately, Growth CapEx). In short... capital intensive businesses require... well... more capital. So not only are they more risky if you don't have operational experience in the sector, but they also compress return metrics (IRR, MOIC). If you’re self-funded and not optimizing for outside investors, that may matter less. If you’re raising capital, it's going to matter a lot. If it's your first acquisition, CapEx-heavy businesses should be very low on your list of targets. It's a big reason why asset-light home services businesses have taken off in the Search Fund world the way they have.
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Reply by a professional
from Babson College in Orlando, FL, USA
Hello Anon - Please feel comfortable to DM - Will be my pleasure to discuss - Thanks ^redacted‌
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