Deal Flow: Oil & Gas Service
Maximize your Returns with this Established Oil & Gas Service Provider
This Oil and Gas Service and Safety Training Company in Oklahoma presents a strong investment opportunity, especially for a buyer with experience or interest in the oil and gas services and safety training sectors. Below is a detailed analysis based on the information provided in the listing:
Business Overview
Asking Price: $5,000,000
Cash Flow: $1,000,000
Gross Revenue: $4,000,000
EBITDA: N/A (not provided)
FF&E (Furniture, Fixtures, and Equipment): $2,750,000 (included in the asking price)
Inventory: N/A (not applicable)
Established: Over 10 years ago
Location: Oklahoma
Real Estate: Rented facilities (2 locations)
Reason for Selling: Retirement
Ownership Structure: Fully staffed, with management in place for day-to-day operations. The owner operates at the CEO/CFO level and is willing to stay on in an advisory role after the sale.
Key Metrics & Valuation
Cash Flow to Asking Price Ratio: The business generates $1,000,000 in cash flow on an asking price of $5,000,000, which results in a cash flow multiple of 5x. This is a reasonable multiple for a business in the oil and gas services industry, particularly given the strong cash flow and established operations. A multiple of 5x is within the typical range for businesses with recurring revenue and a solid management structure, especially in industries that are as vital and stable as oil and gas services.
Revenue and Profitability: The business generates $4,000,000 in gross revenue with a $1,000,000 cash flow. This suggests a 25% cash flow margin, which is healthy for a service-based business. The oil and gas services industry often operates on lower margins, so a 25% margin indicates that the company is well-run and efficient.
FF&E and Equipment: The business includes $2,750,000 worth of equipment in the asking price. This includes specialized equipment required for the services provided, such as safety training materials, pit cleaning machinery, and power washing equipment. These assets are critical to the business's operations and provide a tangible value to the company.
Business Model and Operations
Service Offering: The company provides safety training and services to the oil and gas industry, including:
Safety training for employees working in hazardous environments.
Pit cleaning services.
Power washing for oil and gas companies and municipalities.
These services are essential in the oil and gas industry, where safety is paramount, and the company has developed a solid reputation for reliability and quality.
Customer Base: The company serves oil and gas companies as well as municipalities, indicating a diversified customer base that is not reliant on any single industry segment. The long-term relationships with these customers suggest a stable revenue stream and a strong reputation in the market.
Management Structure: The company is fully staffed, with management in place to handle day-to-day operations. This structure allows the owner to operate at a CEO/CFO level, overseeing the company while the operational team manages the details. This is beneficial for a buyer, as it suggests a smooth transition and the ability to scale the business with the current team in place.
Geographic Expansion and Growth: The company has been approached to perform work outside its current geographic footprint, but the ownership has chosen to focus on its existing market. This represents a clear growth opportunity for a buyer willing to invest in expansion, either by increasing the company’s service area or by offering additional services. The business is positioned well for growth, particularly in a thriving industry with rising demand for services in the oil and gas sector.
Equipment and Facilities: The company operates from two rented facilities. The business owns significant equipment, valued at $2,750,000, which is included in the sale. The current owner will facilitate the renewal of the lease for the new owner if they choose to continue operating in the same locations. This offers stability for the buyer in terms of facilities and equipment.
Strengths
Strong Cash Flow and Profitability: The business generates $1,000,000 in cash flow, providing a healthy return on the $5,000,000 asking price. The 25% cash flow margin is solid, especially in the service-oriented oil and gas sector.
Established Reputation and Customer Base: The company has been in business for over 10 years and has built a solid reputation in the oil and gas services industry. With a diversified customer base, including both commercial oil and gas companies and municipalities, the business has established long-term relationships and a loyal client base.
Significant Growth Potential: There is unrealized growth potential for the company, both geographically and in terms of services offered. The company has already been approached to perform work outside its current service area, and there is significant room to expand by adding more personnel, increasing the customer base, or offering new services.
Turnkey Operation: With management in place, the business is ready for a smooth transition. The buyer can step in and benefit from the established operational structure, which includes a skilled management team and the owner’s willingness to stay on in an advisory capacity for an extended period.
Substantial Equipment Assets: The business comes with $2,750,000 in equipment, which is essential to the operation. This makes the asking price reasonable when considering the tangible assets that can be leveraged for ongoing operations and expansion.
Seller Financing: While the details are still to be determined, the fact that some seller financing may be available is beneficial for potential buyers. This can ease the transition and reduce upfront capital requirements, making the business more accessible to qualified buyers.
Risks and Considerations
Dependence on Owner for Strategic Oversight: While the company is fully staffed with a management team, the business is still dependent on the owner for strategic oversight at the CEO/CFO level. The new buyer will need to ensure they can step into this leadership role or replace the owner’s functions to continue the company's growth.
Limited Geographic Reach: Although the company has been approached to expand geographically, it has so far chosen to stay within its current footprint. Expanding into new areas or adding new services will require additional resources, both in terms of personnel and equipment. This expansion could involve significant upfront investment.
Regulatory Compliance: The oil and gas industry is heavily regulated, and the company must remain in compliance with local, state, and federal laws. Any changes in regulations could potentially affect the company’s operations. The buyer should ensure that the business is fully compliant with industry regulations and that there are no upcoming changes that could impact the business.
Relying on Equipment: The business is heavily reliant on its equipment, and any unexpected breakdowns or the need for expensive repairs could disrupt operations. The buyer will need to assess the condition of the equipment, its maintenance history, and any upcoming capital expenditures required to keep operations running smoothly.
Lease Agreements: The company operates out of rented facilities, and while the owner is willing to facilitate the lease renewal, the buyer will need to ensure that the lease terms are favorable and that the location remains viable for the business’s needs.
Conclusion and Investment Consideration
This Oil and Gas Service and Safety Training Company offers a solid opportunity for a buyer seeking a highly profitable business in the oil and gas services sector. With $1,000,000 in cash flow and $2,750,000 in equipment assets, the business is well-positioned for continued success. The growth potential in geographic expansion and service offerings makes this an attractive opportunity for a buyer looking to scale.
The business is already fully staffed with a management team in place, allowing for a smoother transition. The seller’s willingness to stay on in an advisory capacity adds further value, especially for a buyer who is new to the industry or looking for guidance during the transition period.
While the dependence on the owner for strategic direction and the need for expansion into new territories or services are risks, the strong cash flow and established reputation make this business a worthwhile consideration for a buyer with the resources and vision to scale.
Overall, this business offers excellent profitability, valuable assets, and significant growth opportunities, making it a strong investment for the right buyer.
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