Design-build companies are often the step-children in the merger and acquisition marketplace. The main reasons for this are pretty straight-forward. In most cases, they have little, if any, of the “recurring revenue” which is so highly prized in acquisitions. In addition, because they are construction-related, they are, at least conceptually, very susceptible to economic cycles and down-turns. The Great Recession made this painfully apparent for most (but not all) design-build companies.
That being said, there are some very good reasons to consider acquiring a design-build company. Here are six:
One: Valuations can be very attractive. Because valuations are so low, there can be some extremely good deals and a buyer may have the opportunity to still be very selective.
Two: Acquiring a design-build company can be a good way to expand into a new geographical market. Even if your business is primarily maintenance-oriented, acquiring a design-build business can be a cost-effective way to move into a new market with an established presence from which to build.
Three: Acquiring a design-build company can be an effective way for a primarily maintenance business to add a profitable business line which can feed the maintenance business and help avoid the risk of established customers seeking services from competitors.
Four: Acquiring a design-build company can help a company sell to a new customer segment. You may be able to acquire a company that has a strong presence in a particular industry segment you may find desirable, such as healthcare facilities, educational institutions or some governmental work.
Five: Acquiring a design-build company can provide access to specialized skills, experience and reputation in highly-desirable specialty area such as LEEDS certification, green roofs, water-efficient landscaping, etc.
Six: Some design-build companies have such a strong marketing and sales generation system serving attractive markets that they actually have many characteristics of recurring revenue.
There are some very good values out there that can fit well in the growth strategy for many landscape services companies. Contrary to some prevailing opinions it might just make sense.