Acquisition Evaluation Procedures

Document Type: Guide
Version: 1.0
Last Updated: February 2026
Distribute To: Owner, CEO, CFO, Board

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Purpose

Establish a framework for evaluating potential acquisition targets to support strategic growth through mergers and acquisitions.

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Why M&A in Construction?

Acquisition Benefits:

• Accelerate growth
• Acquire talent
• Enter new markets
• Add capabilities
• Achieve scale economies
• Eliminate competitors
• Acquire backlog

Acquisition Risks:

• Overpaying
• Cultural mismatch
• Key person departure
• Hidden liabilities
• Integration challenges
• Distraction from core business

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Acquisition Strategy

Strategic Fit Criteria:

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         ACQUISITION CRITERIA
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STRATEGIC OBJECTIVES:

What are we trying to accomplish through acquisition?
☐ Geographic expansion
☐ New service capabilities
☐ Vertical integration
☐ Talent acquisition
☐ Scale/market share
☐ Diversification
☐ Eliminate competitor
☐ Other: _______________________

Priority objective: _______________________

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TARGET PROFILE:

Revenue range: $_________ to $_________
Location(s): _______________________
Services: _______________________
Client types: _______________________
Must have: _______________________
Deal breakers: _______________________

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FINANCIAL PARAMETERS:

Maximum purchase price: $_________________
Payment structure: ☐ Cash  ☐ Seller finance  ☐ Earnout  ☐ Stock
EBITDA multiple range: _____x to _____x
Minimum EBITDA: $_________________
Maximum debt assumption: $_________________

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Target Identification

Finding Targets:

Source	Description
Industry contacts	Network with owners, sureties, accountants
Trade associations	AGC, ABC, specialty associations
Business brokers	M&A advisors specializing in construction
Direct outreach	Approach target companies directly
Suppliers/subs	Know who's struggling or succession issues
CPA network	Construction CPAs know who wants to sell

Target Screening:

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         TARGET SCREENING CHECKLIST
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Target: _______________________  Date: _______________

INITIAL SCREEN:

| Criteria | Requirement | Target Status | Pass? |
|----------|-------------|---------------|-------|
| Revenue size | $____ - $____ | $ | ☐ |
| Location | _________ | | ☐ |
| Services | _________ | | ☐ |
| Reputation | Good | | ☐ |
| Owner situation | Motivated | | ☐ |
| No deal breakers | None | | ☐ |

Initial screen: ☐ Pass  ☐ Fail

If pass, proceed to preliminary due diligence.

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Preliminary Due Diligence

Information Request:

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         PRELIMINARY INFORMATION REQUEST
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Company: _______________________  Date: _______________

Request the following (under NDA):

FINANCIAL:
☐ 3-5 years financial statements (CPA-prepared)
☐ YTD financial statements
☐ Tax returns (3 years)
☐ WIP schedule
☐ Backlog report
☐ AR/AP aging
☐ Equipment list with values
☐ Bank statements (12 months)
☐ Line of credit details
☐ Debt schedule

OPERATIONAL:
☐ Organization chart
☐ Key employee list with tenure and compensation
☐ Project list (completed and in progress)
☐ Client list with revenue by client
☐ Subcontractor list
☐ Equipment list
☐ Safety record (EMR, OSHA logs)
☐ Quality metrics

LEGAL/COMPLIANCE:
☐ Entity documents
☐ Licenses and certifications
☐ Pending litigation
☐ Insurance policies
☐ Major contracts
☐ Union agreements (if applicable)

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Preliminary Valuation:

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         PRELIMINARY VALUATION
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Target: _______________________  Date: _______________

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FINANCIAL SUMMARY:

| Metric | Year -2 | Year -1 | Current | Trend |
|--------|---------|---------|---------|-------|
| Revenue | | | | |
| Gross margin | | | | |
| EBITDA | | | | |
| Net income | | | | |
| Working capital | | | | |

Normalized EBITDA: $_________________

Adjustments:
  Owner compensation: $_________________ (excess)
  Non-recurring items: $_________________
  Related party items: $_________________
  Other: $_________________

Adjusted EBITDA: $_________________

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VALUATION RANGE:

| Multiple | Value |
|----------|-------|
| 2.0x EBITDA | $ |
| 3.0x EBITDA | $ |
| 4.0x EBITDA | $ |
| 5.0x EBITDA | $ |

Preliminary value range: $_________ to $_________

Factors supporting higher multiple:
☐ Strong backlog
☐ Recurring revenue
☐ Key employees staying
☐ Growth trajectory
☐ Clean financials
☐ Strategic fit

Factors supporting lower multiple:
☐ Owner dependency
☐ Client concentration
☐ Thin backlog
☐ Key person risk
☐ Financial issues
☐ Integration risk

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Detailed Due Diligence

Due Diligence Checklist:

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         DUE DILIGENCE CHECKLIST
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Target: _______________________  Date: _______________

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FINANCIAL DUE DILIGENCE:

☐ Verify revenue (tie to tax returns, bank deposits)
☐ Analyze gross margins by project type
☐ Review overhead structure
☐ Confirm EBITDA adjustments
☐ Examine WIP for accuracy
☐ Review job profitability history
☐ Analyze cash flow patterns
☐ Verify AR collectability
☐ Review AP for completeness
☐ Identify off-balance sheet items
☐ Review debt and lease obligations
☐ Assess working capital needs
☐ Evaluate equipment condition/value
☐ Review insurance and bonding

Issues found: _________________________________________________

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OPERATIONAL DUE DILIGENCE:

☐ Meet key employees
☐ Assess management capabilities
☐ Review estimating processes
☐ Evaluate project management
☐ Inspect equipment and facilities
☐ Review safety program and history
☐ Assess technology systems
☐ Evaluate quality processes
☐ Review subcontractor relationships
☐ Assess customer relationships

Issues found: _________________________________________________

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LEGAL/COMPLIANCE DUE DILIGENCE:

☐ Review corporate documents
☐ Verify licenses and certifications
☐ Review material contracts
☐ Assess pending/threatened litigation
☐ Review insurance coverage
☐ Check for liens and judgments
☐ Environmental review
☐ Verify compliance (OSHA, DOL, etc.)
☐ Review employee matters
☐ Intellectual property (if any)

Issues found: _________________________________________________

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COMMERCIAL DUE DILIGENCE:

☐ Customer interviews (select)
☐ Market position assessment
☐ Competitive landscape
☐ Backlog quality review
☐ Pipeline assessment
☐ Reputation check (references)

Issues found: _________________________________________________

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DUE DILIGENCE SUMMARY:

Major issues identified:
1. _______________________________________________________
2. _______________________________________________________
3. _______________________________________________________

Deal breakers: ☐ None  ☐ Yes: _______________________

Recommendation: ☐ Proceed  ☐ Re-negotiate  ☐ Walk away

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Valuation Methods

Construction Company Valuation:

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         VALUATION ANALYSIS
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Target: _______________________

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METHOD 1: EBITDA MULTIPLE

Adjusted EBITDA: $_________________

Market multiples (construction):
  Specialty contractor: 2.5-4.0x
  General contractor: 3.0-5.0x
  Design-build: 4.0-6.0x

Selected multiple: _____x
Rationale: _________________________________________________

Enterprise Value: $_________________

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METHOD 2: ASSET-BASED

Tangible assets:
  Equipment (FMV): $_________________
  Real estate (FMV): $_________________
  Working capital: $_________________
  Other tangible: $_________________
  Total tangible: $_________________

Less: Liabilities assumed: $_________________

Net asset value: $_________________

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METHOD 3: COMPARABLE TRANSACTIONS

| Comparable | Revenue | EBITDA | Price | Multiple |
|------------|---------|--------|-------|----------|
|            |         |        |       |          |
|            |         |        |       |          |

Indicated value: $_________________

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VALUATION SUMMARY:

| Method | Value |
|--------|-------|
| EBITDA Multiple | $ |
| Asset-Based | $ |
| Comparable Transactions | $ |

Concluded Value Range: $_________ to $_________

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Deal Structure

Purchase Structure Options:

Structure	Pros	Cons
Asset purchase	Buy specific assets, leave liabilities	Higher taxes for seller
Stock purchase	Simpler, contracts transfer	Assume all liabilities
Merger	Combination	Complex

Payment Structure:

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         DEAL STRUCTURE
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PURCHASE PRICE: $_________________

PAYMENT STRUCTURE:

Cash at closing: $_________________  (___%)
Seller note: $_________________  (___%)
  Terms: _____ years, _____% interest
Earnout: $_________________  (___%)
  Tied to: _______________________
  Period: _____ years
Other: $_________________

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WORKING CAPITAL:

Target working capital: $_________________
Adjustment mechanism: _______________________

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KEY TERMS:

Employment agreements: _______________________
Non-compete terms: _______________________
Transition period: _______________________
Representations/warranties: _______________________
Indemnification: _______________________
Escrow: $_________________ for _____ months

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Integration Planning

Pre-Close Planning:

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         INTEGRATION PLAN
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Target: _______________________
Close Date: _______________

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DAY 1 PRIORITIES:

☐ Announce to employees
☐ Communicate to clients
☐ Notify subcontractors/vendors
☐ Bank/surety notification
☐ IT/email integration started
☐ Key employee meetings

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FIRST 30 DAYS:

People:
☐ Meet all employees
☐ Confirm retention of key people
☐ Align compensation/benefits
☐ Clarify reporting structure
☐ Address concerns/questions

Operations:
☐ Review all active projects
☐ Meet key clients
☐ Review key subcontractors
☐ Assess equipment condition
☐ Review safety program

Financial:
☐ Integrate accounting
☐ Combine banking
☐ Transition bonding
☐ Insurance coordination

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FIRST 90 DAYS:

☐ Full operational integration
☐ Systems integration
☐ Process alignment
☐ Culture integration
☐ Performance tracking

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INTEGRATION TEAM:

| Area | Lead | Responsibility |
|------|------|----------------|
| Overall | | Integration owner |
| Finance | | Accounting, banking |
| Operations | | Projects, field |
| HR | | People, benefits |
| IT | | Systems |
| BD | | Client relationships |

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Post-Acquisition Monitoring

Integration Scorecard:

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         POST-ACQUISITION SCORECARD
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Acquisition: _______________________
Close Date: _______________
Review Period: _______________

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FINANCIAL PERFORMANCE:

| Metric | Target | Actual | Variance |
|--------|--------|--------|----------|
| Revenue | | | |
| Gross margin | | | |
| EBITDA | | | |
| Cash flow | | | |

On track: ☐ Yes  ☐ No

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KEY EMPLOYEE RETENTION:

| Employee | Role | Status | Risk |
|----------|------|--------|------|
|          |      | Retained/Left | H/M/L |

Retention rate: ____%

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CLIENT RETENTION:

| Client | Pre-Acq Revenue | Current | Status |
|--------|-----------------|---------|--------|
|        |                 |         |        |

Retention rate: ____%

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INTEGRATION MILESTONES:

| Milestone | Target Date | Actual | Status |
|-----------|-------------|--------|--------|
|           |             |        | ☐ ✓    |

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ISSUES/LESSONS LEARNED:

What's working: _________________________________________________
What's not: _________________________________________________
Adjustments needed: _________________________________________________

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Related Documents

• Business Valuation Methods
• Succession Planning
• Strategic Planning
• Growth vs. Profitability

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Template provided by support.construction. Buy right, integrate well, or buy trouble.