Industrial Painting - $73M WIP & Backlog
Largest union painting company in the Northeast with 80% of revenue from recurring clients!
This business has nearly $2.8M in assets and over $73M in work-in-progress and backlog! Located in Ohio and New York, this company specializes in painting large infrastructure projects as well as any site preparation associated with a job. Assets include $2.1M worth of painting supplies, safety equipment, rigging, and tools, and $680k in trucks and trailers; all equipment is in place for continued success. The team of union foremen and painters work primarily for general contractors and maximize their awarded contracts through competitive bidding and strong professional relationships. Their annualized cash flow for 2020 is $5.1M, showing year-over-year growth for 3 years.
Service area is 90% in the state of New York and 10% in Pennsylvania, New Jersey, Delaware, and Ohio. Operations are managed from the Ohio office and supplies are stored in a New York area warehouse. There are additional field offices for each large project where location-based staff report daily.
Clients are 80% recurring and consist of general contractors working on infrastructure & municipal projects. They have a highly skilled team of 92 people: 6 administrative staff, 3 project managers, 8 foremen, and 75 painters. Providing industrial painting and site preparation for bridges, tunnels, and transit stations, this company also does lead abatement and shield installation in the winter months when painting is not an option. The team completes approximately 40 projects per year – average projects run in the $500k-$1M range.
Increasing capital to increase bonding capacity would certainly lead to growth in revenue, as well as expanding services to include outdoor painting of private buildings.
Both owners currently work within the business. The majority owner focuses on financial oversight and business management and is willing to remain on staff through transition and beyond. The other owner is the lead estimator and oversees field operations, and he is willing to stay on with the company for several years after closing, as desired.
- Years in Operation: 15+
- Location: New York & Ohio
- Service Area: 90% in New York, 10% in New Jersey, Pennsylvania, Ohio, Delaware
- Clients: General contractors working on infrastructure and municipal projects
- Services: Industrial painting and site preparation such as bridges, tunnels, & transit stations, lead abatement and shield integration
- Building: Main office: 2,000 sq. ft.: 5 Offices, conference room; NY Warehouse: 5,000 sq. ft.: Storage, office
- Employees: 92: 6 Administrative, 3 Project Managers, 8 foremen and 75 painters
- Seller Training Period: 3-5 years
- Growth Opportunities: Increase capital to increase bonding capacity, private buildings for outdoor paint
- Current Owners’ Responsibilities: Majority Owner: 20 hours – Financial oversight, business management; Owner 2: 40 hours – Estimates, field operations management
- List Price: $19,500,000
- Gross Sales:
- 2019: $33,225,739
- 2018: $25,281,685
- Cash Flow:
- 2020: $5,133,447 Annualized
- 2019: $4,147,465
- 2018: $3,784,302
- Assets Included in Purchase:
- Equipment: $2,165,000: Painting supplies, safety equipment, rigging, tools, scaffolding, mobile tool shed, 375 compressor, office trailers, office equipment
- Trailers: 2001 Reel Cable Puller Trailer, 2014 Brindle Trailer, 2017 Gator Gooseneck Trailer, water trailer, 2018 Lo Pro Power Split Tilt Trailer
- Vehicles: 2017 Ford Super Duty F-250, 2018 Genie Forklift, Tractor Sleeper, Truckster
- Work-in-progress: $73,775,848
- Intangible Assets: Positive reputation for completing large-scale projects
- CAPEX: $100,000 or less annually
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
Jan-July - Accrual
|Net Income Shown on Financial Statement||$2,212,576||$3,038,876||$1,808,239|
|Compensation to Owner||$44,713||$151,270||$172,218||Owner 1 - Entire Payment Package w/taxes|
|Other unrelated Salaries||$44,713||$148,249||$188,142||Owner 2 - Entire Payment Package w/taxes|
|Replacement||$-128,333||$-220,000||$-220,000||To keep replace owners ($110K each)|
|Auto & Fuel||$12,067||$24,438||$40,586||75% Personal Auto, 5% Fuel|
|Cell Phone||$10,500||$18,000||$18,000||$1,500/month for two large families|
|Pension & Profit Sharing||$123,332||$247,687||$223,738||Cash Injection Plan (95% to owner)|
|Interest - COGS||$1,345||$58,632||$16,705|
|Non-Working Family||$72,000||$72,000||$72,000||6 children ($12k/child)|
|Non-Working Family||$48,000||$80,000||$70,000||Owners' Wives|
|COGS - Officer Bonus||$289,030||$0||$0||Misc. Repairs - For personal rental properties|
|Meals||$0||$16,493||$9,848||50% (not per diem meals)|
|G&A Officer Bonus||$123,727||$0||$0|
|Rent||$84,000||$171,827||$233,047||Paid to Owner - non-onward going|
|Misc. Repairs||$0||$225,000||$533,829||For personal rental properties - will prove in Q of E|
|Seller's Cash Flow = Total Addbacks + Net Income||$2,994,511||$4,147,465||$3,784,302|
|Profit Margin||27.38 %||12.48 %||14.97 %|
- 2019 profit margin: 12%
Typical Clients and Services
- General contractors working on large infrastructure projects
- Local government projects
- State government projects
- Industrial painting
- Site preparation
- Lead abatement and shield installation in winter months
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Job Life Cycle
RFP / Job Bidding Process:
The company chooses the jobs to bid based on the scope of work of that specific project. If it lines up with the type of work that they do, they study the specifications and plans. They create an activity chart based on how they see the project being completed. They estimate how many days and how many workers would be required for each activity. They place the information from the activity chart into a program to get labor costs. They add in all incidental costs into the program, i.e., tools, materials, lodging, tolls, fuel, etc. and then prepare a quote for submission.
After successful bidding, there is a contract review to make sure the terms of the project match with what they bid. From that point, they develop plans – shielding, lead, paint, safety (as applicable), mobilize to the site and execute the work.
- Duration: Varies per project – 1 to 8 years.
- Need to locate field staff, if any: Same staff used throughout. Labor is union labor.
- Material sourcing: Material usually consists of paint and shielding material. Paint is generally through Carboline, Sherwin Williams or PPG. Shielding material is generally through Safespan.
Total Employees: 92
- 6 Administrative
- 3 Project Managers
- 8 Union Foremen
- ~75 Union Painters
We understand that buyers generally shy away from union-based companies.
- In this case, it is a “Must-Have” in order to get federal & municipal work.
- They are the strongest union market in New York
- Levels the playing field for labor
- Simplifies bidding process
- Only 2-3 companies bidding the same jobs in New York due to the union market; whereas, if they were in Ohio, they would have 13-15 companies bidding the same projects
- On a big project, you can call to Union Hall and they supply labor.
- All labor is trained and tested through the Union, which saves on HR costs.
This company is the largest union painting company in the Northeastern states. It is understood that a new owner may not be able to obtain the MBE certification, and currently 80%+ of the business is MBE work.
The primary contractors (“prime”) for municipal/government jobs are required to credit 10% of each job to a minority contractor. For example, if there is a bridge project for $10M, $1M of that work needs to be from an MBE certified business.
On average, there are 25+ subcontractors for each project. This can be anything from general labor, engineering, staffing, procurement, trades, etc. Any one of these, or a combination of these, could be the 10% minority that the prime contractor must fulfill.
The current owners are very confident that the business would continue running with the same success rate, even without the MBE certification. This is due to the fact that, again, they are the largest union painting company in the surrounding area, with 90+ employees. There is no other union company that can complete these massive projects with the same level of manpower, reputation, equipment, and know-how.
To show how confident the sellers are that very little, if any, revenue would be lost, they are willing to retain 51% equity to keep the MBE if desired. If the buyer prefers to own the majority of the company, the sellers will do up to 30% on a performance-based earn out to show their level of confidence in the ongoing success of the company.
Primary contractors are calling this company for work not because of the MBE status, but because of their size, the projects they have completed, and 90+ laborers they have to complete the project timely & successfully.
Areas of growth include getting into private buildings and other structures (stadiums, for example). The owners are willing to stay on for up to 3 years to help build the private sector.
- Increase capital to increase bonding capacity
- More private work – painting buildings
Purchase Price: $19,500,000
Acquire 85% Equity Interest
70% Cash at Close
15% Performance-based Seller Note
15% Equity Roll
Acquire 49% Equity Interest
49% Cash at Close
51% Equity Roll
Since the owner who oversees field operations is Hispanic, this business has MBE certification and, as such, is given priority when given projects with state and local governments. A large portion of the business’s current work-in-progress and backlog are contracts that were awarded on the basis of the business’s MBE certification.
If there is an interested buyer who is not a minority, the owner is willing to retain equity roll in the business for up to three years after closing. This will preserve the company’s MBE status until the current contracts are completed. During this time, the owner will also help the buyer increase the business’s bonding capacity and acquire more contracts that do not require MBE certification. Once the transition and backlog are completed, the buyer can purchase the owner’s remaining equity and own the business completely.
This method will allow the buyer to retain all of the business’s work-in-progress and backlog ($73M) and transition the business for future success before taking over the reins completely.
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