"Selling your business is our business"
"Selling your business is our business"
Fully describe the business's activities?
The business is an EPC in the renewable energy sector (Engineer, Procure and Construct).
They have been successful in negotiating Power Purchase Agreements with major clients, worth R 170M over the next 20 years, with ongoing extensions.
They are a registered Independent Power Producer and, in association with commercial banks, are able to secure funding for projects, and the clients would repay the business - hence, contractual recurring income is secured for up to 20 years.
How long has the business been established?
16 Years
How long has the owner had the business?
Since inception
How does the business operate on a daily basis?
Salespeople look for new business.
Technicians are out installing and maintaining the clientâs systems.
Warehouse staff procure stock for the various projects and monitor their sites.
Debtors and Creditors clerks ensure statements are aligned, etc.
How are the clients attracted to the business?
They have an excellent reputation in the province they operate within but also do work outside of the region.
They get multiple leads from existing clients (referrals), their website, word of mouth as the demand for renewable energy increases year by year.
They have various offerings for various businesses.
What Advertising/Marketing is carried out?
Very Little.
As they are a Franchise outlet, they pay a nominal fee to their head office, which is used to optimize search engines.
However, they have an in-house client liaison who manages their social media content weekly.
Does the business have any contract work?
Yes.
Various Power Purchase Agreements ( 20 Year Contracts) are in place with SLA agreementâs
What competition exists?
They have only 1 company of their size in their town.
They do, however, have National Companies working in the area as well.
What are the seasonal trends?
There is always a massive increase in demand to complete projects before the end of the financial year, so companies can qualify for section 12B tax incentives.
Also, the worse Eskom and their price increases become, the better the business does.
Is the business VAT Registered?
YES, whatever is needed from their auditors.
What VAT documentation is on file?
Up to date
Are there up-to-date Management Accounts available?
Yes
What Balance Sheet and Income Statements are available?
As far back as 2014
What percentage of the business is cash/credit?
They do not offer credit terms other than on a PPA agreement.
What is the age analysis of the debtors book?
This is on file and will be made available during due diligence
How could the profitability of the business be improved?
This business can expand into various areas around SA and Africa to increase the number of projects.
This expanding their footprint.
Is Seller finance available and for what amount?
No - but a structured deal will be considered.
What is the total staff complement?
32 employees
Give a breakdown of staff/ functions/ length of service?
An organogram is available.
Are they on contract?
All permanently employed.
Do any have management potential?
Yes - to be discussed.
How involved is the Owner in running the business?
The owner oversees costing models and selling prices for large projects.
He negotiates favorable terms with suppliers and stays abreast of new products entering the market.
He does budgets and creates the framework for the business to operate in.
When does the current lease end?
Their property investment company owns the existing property, so a suitable lease can be negotiated, or the property can be bought.
The property will be available for acquisition - its market value is R 9M.
Is there an option of renewal & what period?
10 Years plus
What is the annual escalation %?
6%
What are the trading hours?
7am to 5pm
Closed over weekends and holidays.
When they are extremely busy, the technicians work 7am to 7pm, and Saturdays 7am to 5pm.
What is the square meters of the business?
900 sq metres
Is a copy of the lease available?
Yes
Do you require a licence?
The company employs Licensed electricians (legally mandatory)
Engineering oversight for larger projects is in place.
Compliance with SANS/NRS standards
Municipal approval
What lease deposit and/or other surety is required?
None
What are the main assets of the business?
A full asset list is on file
What is their overall condition?
Very good
Do any require repairing?
No
How have they been valued ?
Fair market value
Which assets are on lease/HP and with whom?
Yes, the property valued at R9M ex vat
Are they presently insured?
Yes
Strengths?
Strong Brand Name, knowledgeable staff, proven track record.
They provide various financial models that other companies cannot.
They have also developed expertise over 16 years in the business.
They have PPAâs that provide residual income.
Weaknesses?
They lack in their marketing and social media presence. It is not where it could be.
Induction training can be improved.
They do not have a presence in other areas and can expand.
Opportunities?
They can expand into other areas and if the right buyer takes over, they can increase their PPA book exponentially, which will require equity funding.
Threats?
Competition will always be there, but because they have always focused on the financial return on projects, the only threat to their market would be that Eskom drops its prices significantly.
What is the reason for the sale?
The owner wants to retire and spend time with his family but would be willing to stay onboard for up to 3 years.
Why is this a good business?
This business has residual income with 20-year contracts in place, and demand for cheaper electricity and energy independence is increasing annually.
Technology is also advancing year by year, creating new income opportunities.
