Sell An Asphalt Paving Business – A Case Study

During the 2016 calendar year, I sold an asphalt paving business in the metro Atlanta area for my client. I was acting on behalf of my client who was the seller, under an Exclusive Listing Agreement as his Atlanta area Business Broker. The business was listed for well over a year and there were twelve inquiries from prospective buyers during the listing period. After fifteen months the business was acquired by an out of state buyer already experienced in asphalt paving. The buyer wanted to relocate to a warmer client and purchase  an asphalt paving business where the asphalt paving and asphalt sealcoating season were longer.

This metro Atlanta asphalt paving business was founded over 40 years ago by the previous owner’s father. The second generation owner, who was approaching retirement age, started winding down the business several years before making a decision to utilize a business broker in Atlanta to sell his asphalt paving business. Needless to say, the corresponding decrease in revenue and cash flow that resulted from the semi-retirement of the owner made selling this asphalt paving business a challenge. In addition, the decrease in activity had a negative impact on the valuation of the business. One of the most important components of business valuation is a measurement of cash flow of the business. In this case, there was no cash flow.

Keys To Sell An Asphalt Paving Business

Rule #1: To maximize the value of your business, do not allow your businesses financial condition to worsen if it is within your control.

Don’t take your eye off the ball and keep the business at a peak performance level all the way up to the closing date. If you’ve ever wondered “How to maximize the value of your asphalt paving business?”, up-trending revenue and cash flow are paramount to doing so.

Given the circumstances stated above we needed to figure out a way to maximize the value of the business and take steps to make it sellable. We decided to stress the positive aspects of the business and market conditions. Those positives aspects were;

1. The business name recognition and the established phone number were exceptional and valuable. The 40 years of customer service built up by this business plus the same phone number for a great deal of that time resulted in daily phone in requests for asphalt paving proposal opportunities.
2. The asphalt paving and seal coating market had been decimated since the 2008 economic downturn and just started recovering around 2012-2013. Many asphalt paving and seal coating businesses went out of business during that downturn. The GA DOT and State of Georgia had just initiated a very ambitious road and infrastructure improvement program. We knew asphalt paving activity was going to grow substantially and that qualified paving companies with experienced personnel would benefit. Profit margins and workloads for paving companies were sure to increase.
3. The company kept ownership of and maintained their substantial equipment inventory so, at a minimum the valuation of the business was at least the fair market value of the equipment. The value of the equipment was fairly significant.

Rule #2: Think of the positive aspects of your business and make those points part of the dialogue when talking with a buyer.

In this case, we were able to generate enough excitement with the buyer that he made an offer.  We had successfully increased the value of the business.

Our buyer made an offer and after some negotiation we reached an agreement. The seller was willing to hold an owner note backed by a security interest in all of the equipment that was purchased by the buyer. The buyer was willing to put a substantial amount into a down payment so it worked out for both parties which is a good test for a successful transaction. The transaction closed in the Fall of 2016.

See Things From The Buyer’s Perspective

A quick point to remember. Buyers want to not only acquire customers, revenue and equipment, they also want qualified, experienced employees when they make an acquisition. If you, as the owner of your asphalt paving company fill the role of estimator, the crew leader, CDL driver and operate the asphalt paver, you are going to have difficulty selling your business. Most buyers that are interested in purchasing asphalt paving companies, in today’s environment are business men not paving operators. We were fortunate in this case study to have a buyer who was experienced in the asphalt paving business.

I hope you have enjoyed this case study on how to sell a business or how to purchase a business. If you’d like to inquire about it or discuss selling your asphalt paving business, please contact me.

Tim Greene
DeFoor Business Services
Atlanta’s Best Business Broker
404 394 7670