Foundral

It’s Never Too Early to Prepare Your Commercial HVAC Business for Due Diligence

capital partner

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If selling your commercial HVAC business is part of your long-term vision, getting your company ready for an acquisition now will help streamline the process later. Even if you don’t sell the business for several years, taking steps today to prepare for acquisition can ensure peace of mind. It can even help your company operate more effectively and improve your options when you are ready to sell. 

Getting ahead of the due diligence process, in particular, can set you up for a successful acquisition in the future. Potential buyers will expect to review a wide range of financial records, customer data and regulatory information to calculate the value of your company.

The documentation potential buyers will look for includes:

  • Financial statements from the past three to five years
  • Tax returns
  • EBITDA (earnings before interest, taxes, depreciation, and amortization), which helps them calculate the company’s cash flow and is often used to determine their offer
  • Maintenance agreements, service contracts and other documents related to recurring revenue
  • Corporate and legal documentation, including articles of incorporation, operating agreements, and corporate governance records
  • Customer and vendor contracts, including supplier agreements, facility leases, and warranty obligations
  • Employee and workforce documents, such as employment contracts and payroll records
  • Local, state and federal licensing and regulatory compliance documents, including records related to environmental compliance, certifications, and inspections

Acquisitions are a complex process. Experts advise that the process of getting a company ready for sale can take up to two years. If you haven’t performed due diligence before the process starts, it could take even longer. Failure to provide the necessary documents may have a negative impact on the valuation of your company or could even prevent potential buyers from making an offer.

Beginning this process now doesn’t only mean you’ll be ready when it’s time to enter the market. Maintaining and periodically reviewing your financial and company records will provide key insight into the performance of your business. You’ll have an accurate representation of day-to-day operations as well as quarterly and annual benchmarks, allowing you to adjust operations to meet your goals.

Preparing for due diligence is an essential step for commercial HVAC business owners considering acquisition. Whether you’re ready to sell immediately or just want to be ready when the time is right, Foundral can help you get ready for the future. Contact us today.

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For mechanical contracting companies, acquisition by a capital partner can bring many advantages, including greater ability to bid on big projects and expand into new markets. However, one of the most significant advantages often goes overlooked: by offering a platform of shared services, the right capital partner can help reduce risk.

When a business grows, so does the level of risk it faces. Compliance requirements become more demanding, cybersecurity threats increase and payroll becomes more intricate. These are all areas where contractors may experience increased vulnerability, but enterprise-level shared services can provide a level of protection.

Risk mitigation through a shared service platform

For an example of how shared services minimize risk, just consider payroll. Payroll errors can be extremely costly, and thankfully they can largely be avoided through a centralized payroll process. That’s something capital partners can deliver.

When capital partners bring established back-end infrastructure, it typically means a high level of standardization. It means proven processes and internal systems for handling payroll, ensuring accuracy and precision. It means contractors no longer have to figure out things like labor laws and reporting requirements all on their own; they have direct access to credible resources and expertise.

All of this helps decrease the fines and penalties that can arise from inconsistency or from administrative errors, which in turn helps safeguard the contractor’s reputation and profitability.

Cybersecurity is just as perilous. Contractors can be prime targets for hackers, and many contractors lack the resources they need to ensure their digital assets are safe. Shared IT services typically mean more robust security measures, more consistent backups and more regular system upkeep, all without the contractor having to become an IT expert.

These are just a few examples of the risks that mechanical contractors face, and of how a shared service platform can keep those risks in check. Find out more about the advantages of working with a capital partner by contacting Foundral today.