In the realm of acquiring a project-based company, hindsight can be a powerful teacher. Here are some critical lessons I've learned that might guide someone when taking over a similar business:

1. Put everything in writing while negotiating the deal. Negotiate with the vendors and write down even what seems to be insignificant details. The sooner you do it, the better it will be. I left details out, assuming they would be obvious/common sense, only to find out later that the vendors were seeing things differently.

2. Don’t underestimate the working capital. During the due diligence, you might check the historical working capital and extrapolate that to get the one on the closing day. This might be misleading since the vendors might invoice like there's no tomorrow, and you will most probably have record levels of working capital. Run some scenarios where the working capital is much higher than in your projections. Will you have enough funds to close the transaction?

  1. 3. Change the accountant right after taking over. I did not want to make changes right away, so I continued with the accountant the business had worked with for many years. He had a personal relationship with the vendors, a relationship that will also continue, with him taking care of their trusts and holding companies. There is a great chance that they will not act in your best interest.

    4. Check, double-check, and triple check that you deduct the commercial taxes for every dollar that is being paid to the vendors, for any work that is being done before the transaction. In my specific case, we agreed to pay the vendors the holdbacks for the projects executed before closing, but my accountant (see the point above) deferred the taxes to the next fiscal year. I found myself in a situation where, as a buyer, I had to pay commercial taxes for money that I did not put in my pocket.

    5. Consider warranties for jobs executed before closing, especially when working with large projects. You might have to send a crew back for days, if not weeks, and not be paid for it (not to talk about the opportunity cost). Maybe keep some money in escrow for 12 months?

  2. 6. Think about how to treat the over-invoiced projects. In the construction industry, it is so easy to over invoice a commercial lump sum project. If the company is unsophisticated, it might be very difficult, or even impossible, to track that. You will have projects that you will take over midway. Those projects might end up being profitable for the vendors for the period before closing, but not for you for the period after. Perhaps agree to some adjustments post-closing, when all the projects are over?