How do I check an industrial maintenance company’s customer contracts before buying?

In plant maintenance, revenue can look steady while the paper behind it is thin. One customer may be under a signed agreement, another may simply send a purchase order each time a job comes up. Reading the contracts tells you which revenue is committed, which depends on goodwill, and which could change hands only with a customer’s agreement.

Agreements against purchase orders

Ask the seller to list every customer and mark each as a master service agreement, a standing arrangement or job-by-job purchase orders. Match that list to the sales records. Work done on purchase orders can be perfectly good business, but it is only as secure as the relationship. Ask your accountant to show how much revenue sits in each group.

Vendor approval and prequalification

Many plants keep an approved-vendor list and require safety and insurance documents before a contractor may work on site. Ask which plants have approved the firm, when that approval comes up for renewal, and whether it is held in the company’s name or tied to a person. Find out what the plant would need to see from a new owner.

Term, rates and consent wording

• Term, renewal and how either side may end the agreement.
• Rate schedules and when they were last updated.
• Wording on assignment, consent or a change in control. Ask your lawyer what it means for your deal.
• Any exclusivity, minimum commitments or penalties.

Talking to key plants

Customer concentration matters here. If a few plants carry most of the work, ask the seller how and when you can meet them, usually late in the process and under confidentiality. Their view of the firm’s crew, safety and responsiveness is useful diligence. For the wider checklist, see what to check before buying an industrial maintenance company.