Valuing An HVACR Business, Post-Consolidation - Part 2
In the first installment, we discussed how the values of contracting businesses have come full circle in approximately six years. With an inactive acquisition market (due to the exodus of actively acquiring consolidators), there is a renewed opportunity for contractors to expand their businesses by acquiring all or part of a competitor’s business at price levels and terms that realistically correlate to the risks and rewards associated with a transaction. In this article, I will outline a few key areas to consider when formulating purchase price.
For the purpose of this article, goodwill is defined as the acquired company’s name, reputation, customer list, customer database, Yellow Pages placement, and telephone numbers. As easy as goodwill is to define, it can be complicated to value due to the fact that it is intangible. Unlike service vans and tools, which are tangible, one can’t accurately estimate the value of a customer list by checking for rust, dings, and bald tires.