Evaluate LBO opportunity, build investment thesis, and model returns
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You are a Private Equity Associate leading the diligence workstream for the Summit Field Services opportunity. The Partner has asked you to complete: (1) comparable company analysis to validate the 8.5x entry multiple, (2) investment thesis with quantified value creation plan, (3) LBO model with 5-year return projections, and (4) risk assessment with mitigation strategies.
Your Mission: Determine if Summit represents an attractive mid-market buyout opportunity. Build the case for a fragmented industry roll-up strategy, quantify EBITDA growth through add-on acquisitions and operational improvements, model exit scenarios, and calculate IRR/MOIC to justify the investment to the IC.
Summit Field Services is a commercial facilities maintenance company headquartered in Charlotte, NC. Founded in 2008 by Mike Henderson (current CEO and 100% owner), Summit provides HVAC maintenance, electrical services, plumbing, janitorial services, and general building repairs to commercial clients. The company operates across 6 states in the Southeast (NC, SC, GA, FL, TN, VA) through 18 branch locations.
Business Model:
Financial Profile (LTM, unaudited):
| Metric | Amount | Margin / Growth |
|---|---|---|
| Revenue | $145.2M | +12.8% YoY |
| Gross Profit | $62.1M | 42.8% margin |
| Adjusted EBITDA | $28.0M | 19.3% margin |
| EBITDA Adjustments | +$2.2M | (owner perks, one-time items) |
| Capex | $3.8M | 2.6% of revenue |
| Net Working Capital | $14.5M | 10% of revenue |
Revenue Growth Analysis:
EBITDA Margin Expansion:
Total Addressable Market (TAM):
Competitive Landscape & Fragmentation:
Key Industry Demand Drivers:
Analysis of 6 comparable facilities maintenance companies to benchmark Summit's financial profile and validate the 8.5x EBITDA entry multiple:
| Company | Revenue | EBITDA Margin | Revenue Growth (3yr CAGR) | EV/EBITDA Multiple |
|---|---|---|---|---|
| ABM Industries (public) | $8.1B | 5.8% | +3.2% | 10.2x |
| EMCOR Group (public) | $11.2B | 6.4% | +8.1% | 12.5x |
| Comfort Systems USA (public) | $4.8B | 9.2% | +11.4% | 14.8x |
| ServiceMaster (PE-backed) | $3.2B | 16.5% | +6.8% | 11.5x |
| FirstService Corp (public) | $4.5B | 12.1% | +9.2% | 13.2x |
| Corrigan Company (private, PE-backed) | $425M | 18.8% | +14.2% | 9.8x |
| MEDIAN | $4.0B | 10.7% | +8.0% | 11.9x |
| Summit Field Services | $145M | 19.3% | +8.0% | 8.5x (entry) |
Core Thesis: Summit represents an ideal platform to execute a fragmented industry roll-up in the Southeast US facilities maintenance market. The combination of Summit's superior unit economics (19.3% margins vs. 10.7% median), proven management team, and highly fragmented competitive landscape ($80B Southeast market with 92,000 operators) creates a compelling opportunity to build a regional leader through aggressive M&A and organic growth.
Why Summit is an Attractive Platform:
Market Fragmentation Creates Roll-Up Opportunity:
LEVER 1: Add-On Acquisitions (Target: 8 acquisitions over 5 years)
| Acquisition Profile | Target Metrics |
|---|---|
| Average acquisition size | $8M revenue, $1.5M EBITDA (18.8% margin) |
| Average purchase price | 6.0x EBITDA = $9M per deal |
| Total capital deployed (8 deals) | $72M |
| Acquired EBITDA (year of acquisition) | $12M (8 × $1.5M) |
| Synergies & margin improvement | +200bps margin improvement on acquired revenue through procurement scale, back-office consolidation |
| Total EBITDA Impact (Year 5) | +$12.0M baseline + $1.3M synergies = +$13.3M |
LEVER 2: Pricing Optimization
LEVER 3: Operational Efficiency
LEVER 4: Digital Dispatch & Customer Platform
LEVER 5: Overhead Scale
Transaction Structure - Sources & Uses of Funds:
| SOURCES | Amount ($M) | % of Total |
|---|---|---|
| Equity Contribution (Thoma Bravo Fund VII) | $105.8 | 40.0% |
| Senior Debt (Term Loan, 5.0x EBITDA @ 8.5% interest) | $140.0 | 52.9% |
| Seller Note (2-year, 7.0% interest) | $18.8 | 7.1% |
| TOTAL SOURCES | $264.6 | 100.0% |
| USES | Amount ($M) | % of Total |
|---|---|---|
| Purchase Price (Enterprise Value) | $238.0 | 89.9% |
| Transaction Fees (Legal, Banking, Diligence) | $7.1 | 2.7% |
| Financing Fees | $4.2 | 1.6% |
| Working Capital Adjustment | $0 | 0% |
| Cash to Balance Sheet | $15.3 | 5.8% |
| TOTAL USES | $264.6 | 100.0% |
Key Transaction Metrics:
5-Year Financial Projections:
| Metric | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|---|
| Revenue | $145M | $162M | $182M | $208M | $237M | $265M |
| EBITDA | $28.0M | $34.5M | $42.8M | $50.2M | $56.8M | $63.0M |
| EBITDA Margin | 19.3% | 21.3% | 23.5% | 24.1% | 24.0% | 23.8% |
| Net Debt | $158.8M | $145.2M | $128.6M | $107.8M | $83.2M | $55.0M |
| Debt / EBITDA | 5.7x | 4.2x | 3.0x | 2.1x | 1.5x | 0.9x |
Exit Scenarios & Return Analysis (Year 5 Exit):
| Scenario | Exit Multiple | Enterprise Value | Equity Value | Gross MOIC | IRR |
|---|---|---|---|---|---|
| Bear Case | 8.0x EBITDA | $504M | $449M | 2.4x | 19.2% |
| Base Case | 9.5x EBITDA | $599M | $544M | 3.2x | 26.1% |
| Bull Case | 11.0x EBITDA | $693M | $638M | 4.0x | 32.0% |
RISK 1: Integration Execution Risk (Probability: Medium | Impact: High)
RISK 2: Recession / Economic Downturn (Probability: Medium | Impact: Medium)
RISK 3: Labor Inflation & Technician Availability (Probability: High | Impact: Medium)
RISK 4: Regulatory / Licensing Changes (Probability: Low | Impact: Medium)
Exit Option 1: Strategic Sale to Larger Platform (Probability: 60%)
Exit Option 2: Secondary Buyout to Larger PE Fund (Probability: 35%)
Exit Option 3: IPO (Probability: 5%)
Recommended Exit Strategy: Target strategic sale (Option 1) as primary path given highest probability of attractive valuation and execution certainty. Begin cultivating strategic relationships in Year 3; run dual-track process (strategic + secondary PE) in Year 5 to maximize competitive tension and valuation.
Benchmark Summit against public and private comps to validate valuation
In PE, comparables serve two purposes:
Key metrics: EV/EBITDA multiple (primary valuation metric), EBITDA margin (quality of earnings), revenue growth (justifies multiple premium/discount)
The 8.5x entry multiple represents a 28.6% discount to the 11.9x comparable median [(8.5 - 11.9) / 11.9 = -28.6%]. This discount is justified by three factors. First, Summit's $145M revenue is dramatically smaller than the $4.0B comparable median—public market investors demand a liquidity premium for larger, more liquid securities, and private buyers pay less for smaller assets that require more integration effort. Second, Summit lacks the geographic diversification of national platforms like ABM Industries ($8.1B, 10.2x) and EMCOR ($11.2B, 12.5x), concentrating risk in the Southeast region. Third, there's an inherent illiquidity discount for private companies versus public comparables that trade daily. However, this discount represents a compelling entry point because Summit's 19.3% EBITDA margin is 81% higher than the 10.7% comparable median, indicating significantly higher-quality earnings. The margin premium suggests that once Summit achieves scale through the roll-up strategy—growing from $145M to a projected $265M by Year 5—the valuation should converge toward comparable medians. The discount also creates multiple arbitrage: if we can acquire smaller targets at 5.0-6.5x and integrate them into Summit's 19.3% margin profile, we're buying at a discount to our own entry multiple. The combination of discounted entry, superior unit economics, and clear path to scale makes this an attractive investment despite the small-cap discount.
Articulate roll-up strategy and quantify EBITDA improvement levers
Private equity creates value through three mechanisms:
Best investments have multiple value creation levers working in parallel, not dependent on a single driver.
Summit represents a textbook fragmented industry roll-up opportunity. The $285B US facilities maintenance market is served by 92,000 operators with the top 50 companies capturing only 14% market share—this extraordinary fragmentation creates a target-rich environment for consolidation. Within Summit's Southeast focus region, an estimated 1,200 operators with $5-25M revenue fit the ideal acquisition profile: founder-owned businesses with no succession plan and limited technology infrastructure. These targets typically trade at 5.0-6.5x EBITDA, well below Summit's 8.5x entry multiple, creating immediate arbitrage. Summit is the ideal platform to execute this roll-up for three reasons. First, its 19.3% EBITDA margin—81% above the 10.7% comparable median—demonstrates operational excellence that can be replicated across acquired companies. This isn't a low-margin commodity business; it's a high-quality operation with pricing power and efficient processes. Second, 62% of revenue comes from recurring multi-year maintenance contracts, providing cash flow stability to support aggressive M&A and reducing execution risk. Third, Summit has scalable infrastructure: centralized dispatch systems, established procurement relationships, and back-office functions that can absorb acquisitions at minimal incremental cost. The management team has successfully integrated 3 prior acquisitions, de-risking execution. The value creation plan leverages 5 complementary drivers. Lever 1 (add-on M&A) targets 8 acquisitions over 5 years, deploying $72M to acquire $12M of baseline EBITDA plus $1.3M in synergies from margin improvement, totaling +$13.3M. Lever 2 (pricing optimization) captures +$6.2M through moving from 2% to 3-4% annual price increases, exploiting Summit's current 8-12% below-market pricing in certain service lines. Lever 3 (operational efficiency) drives +$4.4M via improved technician utilization (72% → 78%) and centralized procurement. Lever 4 (digital transformation) invests $2.5M in dispatch technology and IoT sensors to improve response times and enable predictive maintenance upselling, contributing +$2.1M. Lever 5 (overhead leverage) reduces SG&A from 23.5% to 20.0% as revenue scales, adding +$2.0M. Combined with 5% organic growth on the base (+$7.0M), these levers grow EBITDA from $28.0M to $63.0M—a 125% increase. This thesis is compelling because the levers are mutually reinforcing rather than dependent on heroic assumptions: the M&A provides scale for procurement savings and overhead leverage, while operational improvements protect margins during rapid growth, and pricing power de-risks execution by providing a margin buffer.
Calculate equity value and projected IRR/MOIC for the investment
LBO returns are driven by:
Target mid-market PE returns: 20-25% IRR, 2.5-3.5x MOIC over 5 years
The base case projects a 9.5x exit multiple, representing a 12% premium to the 8.5x entry multiple, justified by three fundamental improvements. First, Summit will have scaled from $145M to $265M in revenue (+83%) through a combination of organic growth and 8 successful add-on acquisitions, moving the company from subscale regional player toward national platform status. This scale matters because the comparable company analysis showed that larger platforms (EMCOR at $11.2B, FirstService at $4.5B) command 12-14x multiples while smaller operators trade at 9-10x—scale reduces risk and increases strategic buyer appetite. Second, Summit will have maintained best-in-class 23.8% EBITDA margins even while growing rapidly, demonstrating that the operational excellence isn't diluted by M&A. This margin profile remains 2x+ the comparable median, signaling that Summit has sustainable competitive advantages (pricing power, efficient operations, strong management) that justify a premium valuation. Third, the company will have a proven M&A integration playbook with 8 successful acquisitions completed, making it an attractive platform for either a strategic acquirer seeking to leverage that capability or a larger PE fund looking to execute a secondary buyout and continue the roll-up strategy. The equity value calculation: Year 5 EBITDA of $63.0M × 9.5x exit multiple = $598.5M enterprise value. Subtracting $55.0M net debt (reduced from $158.8M initial through cash flow generation) yields $543.5M equity value. Dividing by the $105.8M initial equity investment produces 3.2x gross MOIC, equivalent to 26.1% IRR over the 5-year hold period. This return profile is highly attractive relative to Thoma Bravo's 20% target fund IRR and exceeds the 22% median IRR for mid-market PE. The 3.2x MOIC provides meaningful margin of safety—even if the exit multiple compresses to 8.5x (no multiple expansion), the investment still delivers 2.4x MOIC / 19.2% IRR in the bear case, meeting minimum return thresholds. The base case is achievable because it requires only modest multiple expansion (+12%) driven by tangible scale and margin improvements, not heroic market assumptions.
Assess investment risks and optimize exit strategy
Effective risk analysis identifies:
Strong recommend to invest. Summit Field Services represents a rare combination of attractive entry valuation, clear value creation roadmap, and strong downside protection that meets all IC criteria for mid-market deployment. On valuation, the 8.5x entry multiple is 28% below the 11.9x comparable median despite Summit having best-in-class 19.3% EBITDA margins (vs. 10.7% median). This discount is explained by small scale, not poor quality—we're buying operational excellence at a small-cap discount. The value creation plan is credible and diversified across 5 levers. The M&A component (+$13.3M EBITDA from 8 add-ons) benefits from Summit's proven integration capability (3 prior acquisitions) and highly fragmented target market (1,200 operators in Southeast at 5.0-6.5x multiples vs. our 8.5x entry). Pricing optimization (+$6.2M) exploits Summit's current 8-12% below-market pricing with minimal execution risk. Operational efficiency (+$4.4M) through technician utilization and procurement is standard PE playbook. The digital investment (+$2.1M) is modest but high-ROI. Even if we only achieve 70% of plan, we still hit $55M EBITDA vs. $63M target, supporting attractive returns. Return profile is compelling: base case 26.1% IRR / 3.2x MOIC significantly exceeds our 20% fund target and 22% mid-market median. Critically, the bear case (8.0x exit, only modest EBITDA growth) still delivers 19.2% IRR / 2.4x MOIC—this downside protection is rare and reflects both the discounted entry and high-quality earnings. Risk assessment is manageable. Integration risk is the primary concern but is mitigated by experienced management, standardized playbook, and phased acquisition approach (limit to 2 deals/year initially). Labor inflation risk is real (High probability) but addressed through CPI-linked pricing escalators in 90% of recurring contracts and internal training programs. Recession risk is partially hedged by 62% recurring revenue providing downside stability. Exit strategy is highly executable: 60% probability strategic sale to national platforms seeking Southeast presence (ABM, EMCOR, Comfort Systems are all logical buyers at 10-12x), 35% secondary PE, 5% IPO. Having multiple paths de-risks exit execution. The combination of 28% entry discount, 125% EBITDA growth potential, 26% IRR base case, 19% IRR bear case, and diversified exit optionality creates asymmetric risk/reward favoring investment. Recommend proceeding to final diligence and term sheet.
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