How do I check a tree service’s relationships with utilities and municipalities?
Ask for every contract or standing arrangement with a utility or municipality, and check the term, scope, pricing method and what it says about a change of owner. Then ask how the work was won, who manages the relationship and how performance has been rated. Public and utility work often depends on a few individuals.
Work for utilities and municipalities can be steady, but it is often awarded through formal processes and renewed on a schedule. Ask the seller for the contracts, the bid documents behind them and any performance reviews or complaints. Note when each one ends and how it renews.
Read the sections on assignment and change of control with your lawyer. Some clients must approve a new owner, some can re-tender and some ask for fresh qualifications. Find out early which category each client falls into. Ask who holds the relationship. If the owner has personal contact with the client’s manager, the seller may need to introduce you. Ask which crew members and certifications the client expects, since those people may be part of what the client is buying. Check how much of total revenue each client represents. Heavy reliance on one contract is a concentration to weigh carefully with your accountant.
Ask about past safety and quality reviews from these clients, as they tell you how the business is regarded.
Key takeaways
- Collect the contracts and bid documents, with end dates and renewal methods.
- Ask your lawyer which clients must approve a change of owner.
- Find out who holds the relationship and which crew these clients expect.
- Ask how concentrated revenue is in a single client, and discuss with your accountant how heavily to lean on that contract.
Related reading
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Selling
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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?
- 03Business Development Bank of CanadaGovernmentAfter buying a business, what is the next step?
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