Johnson & Sons - Heating, Plumbing, & Air

A comprehensive deep-dive into the pre-intervention state of Johnson & Sons. Use the tabs below to explore all aspects of the business analysis.

Business analysis and due diligence report
Valuation Brief
Baseline Analysis
Value Creation Strategy

The Central Question for Analysis

Does Johnson & Sons' stellar reputation and formidable project backlog justify a premium valuation, or do the underlying risks of key-person dependency, technological stagnation, and deferred capital needs present a 'value trap' for a new owner?

The Story of Johnson & Sons

Core Business Identity

Who they are and what they do.

Physical & Operational Structure

Where they operate and how they're built.

Personal Story & Context

The family legacy and reason for selling.

Financial Health at a Glance

Core Metrics & 3-Year Trend

Revenue and profitability dipped in the TTM after a strong 2023, attributed to project completions and market slowdowns.

  • Owner's Salary & Perks:$450,000
  • Excess Family Salaries:$200,000
  • One-Time Legal Fees:$150,000
  • Rent Normalization (Negative):($400,000)
  • NWC Target:$4,500,000
  • A/R Concern:15% of receivables are over 90 days, tying up cash.
  • Obsolete Inventory:~$200k of stock is slow-moving.
  • Debt:~$4.25M total between LOC and equipment loans.

Operational Deep Dive

Management & Workforce

Highly experienced (15yr avg tenure) but lacks a succession plan for the GM (retiring in 3-5 yrs) and strategic vision for innovation.
Owner is the primary relationship holder for critical banking and bonding capacity.
Faces industry-wide shortage of skilled technicians, limiting growth and driving up labor costs.
Strong but traditional ("the way we've always done it"), with internal resistance to new technologies.

Operational Inefficiencies

Uses a legacy project management system that doesn't integrate with modern accounting/CRM, leading to manual data entry and errors.
Vehicle fleet is aging, with rising maintenance costs and poor fuel efficiency. A replacement program is overdue.
Effective installation techniques are not well-documented and exist as institutional knowledge, creating risk.

Market & Competitive Landscape

Market Landscape

The company is slow to adopt energy-efficient/smart building tech, creating risk of being outpaced by innovative competitors.
Compliant with increasing regulations but not a leader, adding to overhead.
Sales and marketing are entirely passive and reliant on existing relationships. No formal business development team.

Direct Competitors

A large, PE-backed competitor that is aggressively expanding and leveraging technology.
A smaller, respected firm that wins mid-sized projects with strong local ties and lower overhead.

Key Value Drivers

Core Strengths

Reputation & Track Record

A 45-year history of excellence and successfully delivering large, complex, multi-state projects.

Project Backlog

An $88M backlog of contracted work provides strong revenue visibility for the next 18-24 months.

Experienced Leadership

A seasoned, loyal, and autonomous leadership team with an average tenure of 15 years.

Customer & Market Position

Client Relationships

Near-100% repeat business rate from its core clients, reflecting deep trust and consistent execution.

Competitive Moat

Multi-state footprint and a high bonding capacity create significant advantages over smaller, local competitors.

Scalability

Current operational infrastructure and systems are highly scalable, supporting growth without major new investment.

Deal Structure & Opportunities

Valuation Insights

Asking Price

$51,250,000

(Includes $6.2M RE & $5.4M FF&E)

Implied Business Value

$39,650,000

Valuation Multiple: 4.64x on $8.54M Adj. EBITDA

  • FCF Risk: Inflated by deferred CapEx on aging fleet & facilities.
  • WACC Risk: Increased by rising interest rates and private company risk.
  • TV Risk: Perpetual growth assumption is challenged by cyclical market.

Deal Dynamics

Seller Financing

Willing to hold a note up to 10% ($5.1M).

Listing Duration

Quietly shopped for 3 months; new to wider market.

Target Buyers

Well-capitalized firms with industry experience.

The Path Forward: Growth vs. Risks

Stated Growth Opportunities

  • Texas Expansion: Logical but capital-intensive ($3M-$5M est.).
  • Hospitality Sector: Has experience, but market is highly cyclical.
  • Smart Building/Tech Division: Significant opportunity but requires hiring new talent.

Legitimate Buyer Concerns & Risks

  • Key Personnel Risk: GM retirement, owner's role in banking/bonding.
  • Deferred CapEx: Immediate spending required for fleet/facilities.
  • Technological Lag: Legacy software hinders efficiency.
  • Margin Compression: Reliance on fixed-price contracts is risky.

Personal Story & Context