This company represents a tremendous opportunity to buy a best-in-class construction contractor. They operate at ~10% EBITDA margin with ~85% of their work derived from long-term contracts. These contracts are in two forms.

First, they have Job Order Contracts (JOC) with counties, municipalities, and school districts. The JOC’s are multi-award, meaning multiple vendors are approved under the master contract. The company has a near 100% renewal rate on these JOC’s. They gained their first JOC over 15 years ago and have added additional JOC’s over the years. They currently have 7 JOC’s.

Within each JOC, the company performs a full range of general contractor (GC) work. They can do anything from painting a wall or replacing a window, up to large renovations and infrastructure work. The company also bids certain projects for local municipalities, but these bids fall outside of the JOC arrangements.

The second type of contract is Continuing Services Contract (CSC), which they have with multiple hospital systems. With the hospital system CSC, the company will also perform a full range of GC work. However, some of the hospital work is more specialized. For example, the company will work directly with the hospitals equipment vendor to build a room around and help to install sophisticated medical equipment.

There is significant opportunity to grow within the JOC and CSC framework. The owner is confident he could secure other JOC’s and CSC’s. However, he is comfortable with the company’s current size and is not willing to take on the added burden required to manage that growth.

The company subcontracts ~70% of the work, although all subs operate under the supervision of the company’s experienced and tenured Project Managers and Superintendents. The company will self-perform work on smaller jobs.

There is a very strong staff highlighted by a Managing Director that is fully capable of replacing the owner to run the company. The Managing Director is already participating in a profit-sharing plan and runs most of the day-to-day operations. There are also very strong finance and human resource disciplines, along with the aforementioned very strong group of project managers and superintendents.

The owner is not required for day-to-day operations. He takes the lead in securing the MSA renewals and provides corporate oversight. He does serve as a project manager on some jobs, mostly because he likes to stay involved.

The owner is selling because becaise he would like to retire. He is not interested in rolling equity, but he is open to long-term arrangements to ensure a successful transition.