Fall 2014 issue of Horizons

∙ Strong client relationships – A construction- related company that has strong client relationships will be more attractive to a potential buyer. Construction- related companies with strong client relationships will tend to have more negotiated bid, rather than competitive bid, projects as well as longer histories of serving their respective clients. These factors will usually lead to more sustainable, recurring work with clients and a more stable earnings stream, both of which reduce risk and increase value. ∙ Point in the business cycle – As construction-related companies are very economically sensitive, where the economy is in the business cycle at a given moment has a great impact on expected performance and valuation. When the overall economy is approaching, or in the midst of, an expansion, the long- term growth rate used in the income capitalization approach will be higher and the revenue or EBITDA multiple applied will increase, resulting in a higher value.

The volatility and economic sensitivity of companies in the construction industry can make them difficult to value. For this reason, it is important to have a good understanding of the valuation framework that should be used to value a construction- related company and/or consult with a business valuation expert that has construction experience.

RubinBrown’s Construction Services Group We provide services to general contractors, specialty subcontractors, home builders, architects and engineers and related companies in the construction industry.

Frank Hogg, CPA — St. Louis Partner-In-Charge Construction Services Group 314.290.3413 frank.hogg@rubinbrown.com

Matt Beerbower, CPA — Denver Partner Construction Services Group 303.952.1252 matt.beerbower@rubinbrown.com

Ken Van Bree, CPA — St. Louis Partner & Vice Chair Construction Services Group 314.290.3429 ken.van.bree@rubinbrown.com

Michael Fox — Kansas City Manager Construction Services Group 913.499.4434 michael.fox@rubinbrown.com

www.RubinBrown.com | page 37