Fire Suppression Business in NYC – Is It Worth the $1M Price Tag?
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You kind of tend to value the servicing and maintenance a little bit higher because it's more consistent than the project revenue, which can be lumpy and cyclical and inconsistent. That just changes everything. That is the magic key that's going to unlock or kill interest in this business. This is definitely one of those markets where it feels like there's a fine line between this being an amazing business and it being a terrible business.

Welcome to Acquisitions Anonymous. Today's deal is...

I involved myself, Heather, and Travis Jamison digging into a fire suppression business up in New Jersey. And the past couple episodes had a strong New Jersey tri-state area bent. So we're excited to bring this one. And I think you'll be surprised how we ended up feeling about this deal. So stick around through the whole episode and see where we ended up kind of as we dug into the whole thing. Here is the episode.

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We're back. Heather, how's the weather in SoCal? It is beautiful spring weather. It is not getting hot yet, but it's sunny and beautiful. And when you go to the beach and you go for a walk, you see whales because it's like whale season too. It's pretty nice.

Do you think people change when they move to Southern California? Like, because here's my experience. Like, I went to San Diego and like hung out with my wife for a week, like, and we stayed in La Jolla. And I was pretty much convinced the number one industry in San Diego was brunch, even on weekdays. So like...

Like what, what, what's going on in SoCal that causes this to happen? We just love being outside because we could do it all year round. You know, like whatever's going on, you, you go, you get your friends together, you go for a walk on the beach or you go for a hike and everything is really beautiful. And yeah, we go to brunch, you know, afterwards. Got it.

Travis, how do you feel about people from Southern California? No, they're just the same as, you know, where I live. You know, Asheville, North Carolina, we go look at the whales, hang outside year round. It's exactly the same, basically. Same people, same vibe. Actually, everyone from here is from California at this point. I bet. Yeah. That's the other thing. People in California complain about California, too. You think everybody else does? They do it here, too. It's the exact same.

It's funny because I bought a business once with employees down in Medellin, Colombia. Have you guys been to Medellin, Colombia? Yeah. Heather, have you been there? I have not. Yeah. Travis, tell us about the Eternal Spring thing. It's super...

It's super fascinating. Well, I don't know that much other than just like the weather is always nice, right? It always feels like a spring day. Yeah. Yeah. It's like better than Southern California weather. Like it makes San Diego weather look bad. Wow. It's just like perfect every day, 53 low, 72 high, mostly sunny, and it rains every day at five o'clock for five minutes. Like that's basically the weather. That sounds good.

And kind of like Southern California, one thing, and I don't know if this happened to you, Travis, but one thing that shocked me was

Everybody you talk to there is like, oh, the weather here, it's too perfect. Like they found a way. We can complain about it. It just blew my mind. It might be true, though. So in Asheville, I think we have like pretty perfect weather, like nine months a year. But that winter months, which aren't terrible, but it really makes you appreciate the rest of the time.

Where, you know, if it's always the same, if it's always 75 degrees, like I guess you stop appreciating it as much. Yeah, that's true. So to do the worst non sequitur in history, let me show you guys this. I tweeted it this morning because.

There has been something that's quietly happened in the United States that nobody really talks about, which is basically the United States has basically won the war on structure fires. Like structure fires, despite us building a bunch more, the number of them in the United States is down over 50% since the 80s.

like just wow like like heather when you and i were kids right like there were like people's houses would burn down yeah all the time it was a regular thing yeah true and i can't remember the last structure fire or house fire that i saw you know near me in san antonio it was so ingrained in us as kids that we had fire retardant

What? Yes. Yeah. Yeah. And there was a, there was a famous episode at some point in my childhood where all of them had to be thrown out because they decided that whatever they were using was toxic. Yeah.

And so our fire retardant pajamas had to be thrown away. They were killing you. Just slowly instead of quickly. But that's because there were structure fires and they, you know, this is one of the things that they did. But that's interesting. I forgot about that. Growing up in the 80s, Travis was totally metal. Like there was just so much stuff that our parents...

Like they would just be like, come home when this when the streetlights come on like that. They have no idea where we were. We were burning stuff down like compared to today. Total terrors. Yeah. Well, I mean, I talk about this, this stuff. I mean, I'm I grew up in the early, early 80s, born 85. But the stuff that we did growing up, like you would just be in jail now. You couldn't. And it was fine. It wasn't a big deal. But but you just can't do it now. No, that's right. Yeah.

So, yeah, this is one of the things that I'm maybe turning into like an early, you know, I'm starting to consider entering my boomer years. But like I look around and there's so many things that have gotten better in life and people just kind of just like, oh, yeah, that's the way it's supposed to be like this. And then I did a video recently about smoking. Like we've totally won the war on smoking. Like smoking used to be this scourge.

where people were like smoking on planes. Like I remember my grandparents, my grandparents smoked menthol cigarettes, by the way. It's disgusting. But like fires or something similar, like there's so many things. Before you get off smoking, I have to throw in another childhood memory. We made our parents ashtrays in kindergarten, like out of clay. Okay.

That was your little project. You would make your parents an ashtray and bring it home. Okay. All right. So we've gone totally way off topic because I brought a deal about fire, but I have to share one more thing about how metal the 80s were. That is totally, totally off topic, but indulge me. Are you guys familiar with a movie called The Toy? Do you know what I'm talking about? Okay. I don't.

All right. I'm going to give you the premise of the 1982 movie, The Toy. And I want you to rate on a scale of one to 10, how likely or possible it would be to make this movie today. Okay. Are you guys ready for this?

All right. It stars Richard Pryor and Jackie Gleason. Richard Pryor is an African-American comedian. I think we're all familiar with him. Jackie Gleason, most people are not familiar with him because he's been dead for a long time, but he was a big time movie star back in the 50s. Did the Honeymooners and all that kind of stuff. He was Seinfeld before Seinfeld existed. Okay. So here is the premise for the toy.

So Jackie Gleason is an old, rich white guy, and he has a young son. He's an old guy, and he's one of those dads who's super rich and has a young son that he spoils. And so he has made all of his money by owning a chain of department stores. And Richard Pryor's character is a down-on-your-luck comedian who has taken a night job cleaning one of Jackie Gleason's stores.

And Jackie Gleason comes in and says to his son, hey, I will give you anything you want. You are my baby. I am going to spoil you. And they go to the department store in the middle of the night when it's closed. And they're walking around. And the Richard Pryor character is listening to music and does kind of just a routine of dancing and all that kind of stuff while listening to music and cleaning the store in the middle of the night. He doesn't know anybody's watching him.

Jackie Gleason and his spoiled son walk up and the spoiled son says, I don't want anything in the store. I want him. That's the premise. That's pretty awful. Pretty bad. Yeah. I vaguely remember this now. I do think I remember this movie. Does the Jackie Gleason character say, no, no, people are different than things and we're all humans together and we should treat everybody with the respect, you know, of humanity. No, he tries to negotiate with Richard Pryor becoming his son's friend.

buying Richard Pryor for his son. That's basically the premise of this movie. And it's from 1982. I'm looking at your screen share here. I've never seen a Rotten Tomatoes score of 3% before. Like, this is the lowest score that's ever happened for a reason. Yeah. Yeah, that was the 80s.

Yeah. So the 80s were metal. There were no rules. There were no rules. Somebody got this through Paramount. Yeah. This is incredible. Okay. So anyway, oh, a scale of one to 10, how likely is it to get made today? You'd be canceled just for pitching it. Yes. Yeah. Deservedly so. Okay. So we're all in agreement. It's a one. Zero. Zero.

It's crazy. Okay. Well, let me pitch you on, since we're back to fire, let me put you on this fire suppression. Okay. New York City fire suppression and consulting business in New York for sale. They're asking $4 million for it. They do $3.6 million in revenue and $750,000 in cashflow.

There is 50% seller financing available, and it's an opportunity to acquire two integrated fire safety businesses with 40 plus years of experience serving New York City and surrounding areas. Services include fire sprinkler installation, inspection, and maintenance, plus a growing consulting division. They have $5 million in signed contracts in 2025, and they target 25% to 30% net profit.

The global fire suppression system market was valued at $22.3 billion in 2024 and is projected to grow at 5% from 2025 to 2030. This will be driven by increasing safety regulations and technological advancements. As regulatory compliance continues to tighten across various sectors, this will drive the demand for fire suppression systems. Compliance with these regulations is mandatory, ensuring a steady market.

Innovations such as smart sensors and IoT integration are enhancing the efficiency and effectiveness of fire suppression systems, driving market growth.

They service New York City, Nassau, Suffolk, and the surrounding suburbs. They have long-term contracts with hospitals and property managers, and they have an established reputation with over 40 years of trusted service and strong local connections, ensuring a loyal customer base and steady revenue stream. They have 16 employees with high retention potential, and a signed confidentiality agreement is acquired for the exact location.

The business has been around for 40 years and they are selling to pursue other business interests. Owner financing is available and contact the seller for more information. Um, and they'll do up to 50% down and provide some supportive training. I think this is interesting. This is totally worth taking a look at. Yeah. Yeah. So Heather, have you seen one of these before? What? I have. I have. So, I mean, there it's, it's a mix of installing new, uh,

or replacing old sprinkler systems and then inspecting and servicing existing. The key with something like this is the mix of the revenue. How much is new installation versus how much is servicing and maintenance?

You kind of tend to value the servicing and maintenance a little bit higher because it's more consistent than the project revenue, which can be lumpy and cyclical and inconsistent. Now, this is located in an area where there's heavy compliance that's sort of driving the product, right? You've got regulations that are requiring this in certain types of buildings, right?

And that, you know, that's a nice moat to have for a business like this. But I think the key here in terms of valuation for me would be knowing a little bit more about the revenue mix between project and maintenance, the reoccurring type. 100% agree with you on that. It's what it's a 5.3 X multiple. Yeah. If it's, if it's mostly like, you know, new builds and commercial stuff, well, that,

That's really difficult to get around if it's a really sticky recurring residential or, or whatever type stuff, apartment buildings, um, has to be done X times per year. That comes a little more interesting. Exactly. So you said you, you said you like this, Travis, what walk us through your, your thinking on it. All right. Well, I say it's interesting. I mean, it's, it's been around for 40 years. That's always a good first sign. Um,

I think what Heather mentioned, the market here has high regulations. These things are businesses like this are probably pretty essential, probably are pretty ingrained in the system, whether the amount that they're required to do is necessary or not. I could see that being very sticky. Profit margins are pretty good.

This is you know, this isn't going to disappear like AI is not going to disrupt this and like take it away type of thing That it really comes down to me is kind of like the the multiple on this 50% seller financing is certainly really nice, but you're still paying for that eventually - like yeah, yeah, it's a nice, but you still have to pay So that's the biggest question

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So how would I potentially structure a deal to buy this business, Heather?

I mean, yeah, over five times feels way too high. And it almost feels like the reason they're offering so much seller financing is they're kind of thinking of it like an earn out. You know, we think it's worth this over time and therefore we'll get paid by, you know, carrying back this paper. So I don't love that. As an SBA lender, that's what we do with our clients at Viso. It's always SBA. You can't actually have any earn outs.

So, you know, that's a bit problematic. I think you could structure something at a lower valuation, probably nothing more than a four and maybe lower than that if we find out there's more project work here. And then, you know, you want maybe a 10 or 15% seller note and, you know, a 10% equity and 80, 85% SBA financing. That's the way I would typically see something like this structured.

You know, there's also the question of whether or not the seller, you know, whether the relationships are transferable. So this is kind of like a contracting business. And whenever we look at contracting businesses, we kind of think about that. Sometimes those GC relationships that drive the business aren't really very transferable. So that would be another kind of ding on the valuation that might take it a little bit lower if you learn more about how that works. But you could structure an SBA loan

at about three and a half times that 750 cash flow. And your debt coverage would be good and make up the rest with equity and a reasonably structured seller note. I think the thing to know most is how much of this is project based. That just changes everything. That is the magic key that's going to unlock or kill interest in this business, I think. Because it's been a pretty good few years for building new things.

And now that's kind of slowing down. That's happening. And all of a sudden, half their business gets cut. Well, it doesn't matter how much seller financing you have. It doesn't work. And that maybe is the 50%. That's what they've already maybe experienced is that they've had buyers find out that they can't get financing because of project-based work. And they're thinking maybe some kind of seller note that doesn't have to be paid monthly the same way. Maybe it's based on revenue or EBITDA or something else.

maybe that's what they're trying to solve for here in offering that much seller financing. It's a hint or a clue maybe. Is there a play here where you buy this and you try to get into the maintenance? You grow the maintenance part? Like the contract work is just a gateway drug for you to kind of transform the business over time?

What I've seen in these businesses is you kind of have to win the maintenance when you do the installation. And there's plenty of people who have looked at businesses like this where they weren't doing that. Somebody else got the maintenance. You can't go kind of rewind that maintenance very easily. So it's like you have to grow into more maintenance revenue by doing more projects. So-

That's what I've seen a lot of times with these kinds of businesses. So it's not that easy to just go compete and win more maintenance without doing more projects. This could be super interesting for someone who already has some relationships in some sort of real estate play. Like you have those talk to your buddies like, hey, why don't you use me instead? Right. Do

Do I have any kind of like certifications I have to have to be in this business? Do you have to have... I would think so. Yeah, this is safety related. Jim Bob's like, oh yeah, your snickers look good to me. We're good. So who do we think should buy this? I'm with Travis, somebody who's already...

somebody's already adjacent to this somehow. They're doing work on these same buildings alongside this kind of business. It needs to be sort of a strategic buyer like that rather than a first-time buyer and this is the only business that they have. Yeah, I like companies that identify things

where their expenses are, and then go and acquire those types of companies, right? So I have a friend in the digital marketing space, he's like, Oh, I'm spending a lot on content, I'm gonna go acquire a content agency, I'm spending a lot on ads, we go buy an ads agency, something like this, if you're, you know, a commercial builder, and you're building out apartment complexes all day, well, a lot of your money is going to here might as well go to there, you have other relationships, you can expand it from that, like, that that probably makes a lot of sense.

Coming in fresh, it's like the multiple doesn't quite work. The cash flow is fine, but it's not like huge, huge, right? So you don't have a ton of wiggle room for putting in like a nice management layer and stuff like that. Yeah, I think you need to have something already that you can expand upon. It really changes everything. This is definitely one of those markets where it feels like there's a fine line between this being an amazing business and it being a terrible business.

And you have to go figure that out before you decide to become a buyer in this space. And I think the only way to figure that out is to go talk to a lot of people in it, ask a lot of stupid questions. I definitely think that this deal would be worth searchers taking a look at. We can't say, does this make sense or not? But you can definitely say it's worth looking into to find out the details.

Maybe it is highly attractive. Maybe the owners have been checked out for a long time. Maybe the owners are completely the business and it can't work without them. Like, who knows? But those little details will...

make or break this one. Do we buy this thesis they have here that fire suppression market is going to keep growing aggressively? Maybe. Depends on what's happening with compliance. I have certainly seen some businesses where I would believe that thesis because of what you have to really get behind what's changing in the regulation. Have the regulations just increased and there's your total addressable market just got bigger because there's all these buildings that have to do something.

Possibly, but that's the kind of research you need to do to figure that out. I don't see fire suppression regulation decreasing in New York City. Definitely not decreasing. No.

It's at least holding steady and maybe it is increasing and maybe they're, you know, they're, it's encompassing more buildings or the buildings that already have to do it have to have this new technology. They're talking about smart sensors. You know, maybe that's where the growth is, is that the smart sensors become required at some certain point in the future and those all have to be installed. Could be something interesting there. That'd be fantastic for this new regulation system.

every building with X amount of occupant has to have the smart sensor done. Yeah. If you're going to own a bill, a business like this, that is totally dependent upon super duper growth and regulation. Like you definitely want to do that in New York, Boston, Chicago, or California. But if I'm a seller and I know this, I know this market well, and I know this regulation is coming. This is also the question of why are you selling now? You know, they say for other business interests, but

It's a little curious. It's always a little bit of a tell other business interests. Like I love when people are just like, no, I'm old and I'm retiring. Like, great. Other business interests, it means something else is far more interesting to you than this. Or it could just mean I'm scared. Or I'm burned out. I've seen that I'm just burned out of this and I'll do anything other than this. See that too.

I sold the business and said it was for other business interests. And when people asked, I was like, yeah, I'm just not the right person to own this business. I was just straight up about it. I was like, this needs somebody who is passionate about this space and can do it better than me. I don't know. If I recall correctly, the business broker was like, that's the first time anybody's ever said that. I was like, oh, well, anyway. Yeah.

We sold the business, so they seemed to buy it. It's one of the best reasons to sell it. If you're burnt out, if you don't have the passion to drive it, give it to somebody else. Because otherwise, if you're not growing, it's going to slowly deteriorate as is. I did that with one of my companies. Same thing. I was like, nah, I just don't care enough anymore. Let's move on. It's totally reasonable.

All right. So Heather, a searcher brings you this deal. What are the first couple of questions you ask? So you talk about mix first and foremost. Is that number one? Talk about mix. Talk about the capital structure here. If they're going to try to pay more than five, if they're going to pay this asking price, it's got to be equity or that seller note has to be basically having almost no payment requirements, you know, so that the bank lender can be ahead of that and feel really comfortable that,

They've got plenty of room for downside to happen and they still get paid. And then I would get into the

The skill set fit. This buyer, have they ever run a blue collar business? Have they, you know, do they have any experience? How are they going to get trained in whatever the licensing or certifications are required? So I think the individual's fit for this business is really important. It would be to a lender. One thing I don't think we really touched on is...

They claim there's already 5 million signed contracts for 2025. And with, you know, they're targeting 25 to 30% net profit.

Well, that's pretty big. If it happens to get, what, 30% net profit, then the multiple is almost looking cheap. It's like less than 3x. So if it's a growth play and these contracts are legitimate, it depends on the type of people signing the contracts, right? Are these like new builds or is it something else? But it becomes far more interesting at that point.

Yeah, that may be a sign. Very, very rarely does a mature business like this add 50% in recurring revenue maintenance contracts in a year. So it makes you suspicious when you look under the hood, kind of our worry that this is mostly new build contract work, contractor work is, you know, is the story here.

We'll see. So, Travis, let's say you you you're you're not doing any of the stuff you're doing now and you're like, hey, I'm going to go do this as a searcher. What would be like the first couple of things you do to go figure this deal out? Obtain a fire suppression contractor license. It's it doesn't look too hard. It's like less than 600 bucks. Oh, no, no. It's about like twelve hundred bucks total to do it.

You must be 18, read and write English, be able to perform the work, and have good moral character. Like, this is – I don't feel safe anymore. All right. Anyway, what was your question? My question was you're talking to a searcher, an independent sponsor who sees this deal and wants to go figure it out and whether it's worth digging in more. Like, what are the first few steps you do? I need to just have some –

ideas about how sticky this revenue is going to be. Like when people bring us deals, they

We're not guessing on the future profits of the business. We want to look at things that are very much like a no-brainer. So if we come in and we can get comfortable that the revenue and the profits, to be very clear, are going to be here two, three, four, five years from now, then we can get behind it. And so that's the first step for us to take a look at anything is how sticky is this? Because we're always...

we're not necessarily looking for specific things to back. We're looking for things not to back. Like we're very agnostic with what we're interested in. Like anything will work as long as it doesn't have these like trigger points that for us to say no to. So in this case, yeah, the stickiness of and the predictability of the revenue is the biggest thing. Yeah. And I think for me, you know, I would definitely talk to the broker and, you know,

kind of get their opinion on the business, understand the dynamics you're talking about, the stickiness of the revenue. I would actually also just start calling everybody I know for a few weeks and try to network to folks. I'd call owners in this space, experts, read every article I can. This is one of those spaces where I think there's some nuance between being highly profitable and being in a dumpster fire.

And I would want to learn that really quickly. And you could do that, I think, while you're exploring a deal like this. There's nothing wrong putting forth an LOI while you're still learning the space. A lot of times, making an offer is a great way to learn something about the business and the market. Cool. All right. So let's wrap this one up. Travis, where's your head at on it? Thumbs up, thumbs down? It's neutral. I just have to see more. I would be very inclined to look deeper, though, for sure.

Heather? Same. I would get the book and I would want to get some questions answered. Definitely. Well, I'm supposed to, for the sake of good radio, say no to this horrible and like be, you know,

be that way. But I actually like it. I think for the right searcher, I'd go dig in. But look, I think 99 times out of 100, there'll be something about this that just makes it totally, as you said, Heather, unfinanceable or untenable for your typical buyer. So be really curious. Curious if anybody looks at this one, they can let us know what they find out.

All right. So, Travis, people can find you at CapitalPad.com. CapitalPad.com. If you're a searcher, that you have a deal, ready to go, ready for the equity raise, bring it to us. We would love to take a look and see if it checks all of our boxes. And then if it does, we'll present it to our investor base.

And what kind of deal size range do you guys tend to do? Probably the smallest deal we've done is about a $3 million enterprise value deal. The largest is around a little under $20 million. I mean, that's obviously the independent sponsor space, but the searcher space, the minimum is three. Super cool. All right, everybody. Thanks for being here. We'll see you next week.