Snow removal company valuations in Canada

by a searcher from Ivey Business School at Western University

2 years ago

Has anyone valued snow removal companies in Canada? Looking for an idea of expected margins. 

Saw two snow removal businesses fold in Collingwood this year - homeowners now jammed paying an extreme range ($250/season up to $1500/season in the same zipcode) - assume route optimization drives margins, what is a "good" margin in this space? 

thanks

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4 comments

searcher from The University of Michigan - Stephen M. Ross School of Business

following, just learned this is a search industry! I'm in the US and I had always assumed this service was mostly municipal around me (Lake Tahoe and Michigan).

2 years ago | like reply | 0 likes

searcher from University of Western Ontario

I worked on the investment team for a PE fund that acquired one of the largest snow removal companies in Canada and were rolling up other players in the space. Generally speaking, EBITDA multiples are relatively low (3-5x) due to capex needs, seasonality, increasing labour costs/shortages. However, the well run companies in this space have gross margins of 40%+. Higher valuation premiums are given to companies with:
- long-term contracts (or recurring contracts) with blue chip customers
- high proportion (80%-100%) of B2B business
- newer/sophisticated fleet
- mix of fixed and variable contracts
- and of course, the usual positive characteristics (good management, high cash flow, etc.)

2 years ago | like reply | 0 likes

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