How do I check an elevator service company’s maintenance contract renewals?
Ask for every maintenance contract with its start date, term, price and renewal terms, then compare the list against revenue. Check how many renewed in past years and why others left. Read each contract for assignment clauses, since some need the building owner’s consent to pass to a new owner.
Maintenance contracts are the steady core of an elevator service company, so the renewal pattern deserves careful study. Ask for a schedule listing each building, the contract start, term, price, renewal method and any notice period. Check that it matches the revenue shown on the financial statements.
Look at history. Which contracts renewed without fuss, which were renegotiated and which were lost? Ask why. A lost contract due to price is different from one lost to poor service. Ask the seller what share of renewals are automatic and what share need a fresh signature.
Read the contracts themselves, or have your lawyer read them. Note whether they can be assigned to a buyer, whether the client must agree and whether either side can cancel on short notice. Pay attention to any with a single large building owner or manager, where one decision could remove a lot of income. Ask about price increases and how clients reacted. Finally, find out who handles renewals and relationships. If the seller does it personally, plan how that will be handed over.
Key takeaways
- Build a schedule of contracts with term, price, renewal method and notice period.
- Ask why past contracts were lost and what share renew automatically.
- Have a lawyer check whether each contract can pass to a buyer.
- Find out who manages renewals today and how it will be handed over.
Related reading
15 pages on the same subject, grouped by topic.
Buying
- Expert answerHow do I read an HVAC company’s mix of installs, service and maintenance plans?
- Expert answerWhat should I check in a property maintenance company’s service contracts before buying?
- GuideBuying an elevator service company in Canada
- Expert answerHow do I check an industrial maintenance company’s customer contracts before buying?
- Expert answerWhat should I look for in a trucking company’s preventive maintenance schedule?
- Expert answerHow do I check a limousine company’s airport transfer contracts?
Financing
Due diligence
Selling
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
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