TECH–2488: Profitable Environmental Lab
in Alaska with Strong Growth Potential
Only Lab in the Area – Buyer Can Operate from Mainland– Cross Sell Potential
This is a unique and outstanding opportunity for a larger lab to acquire this well-established Alaska-based lab, which serves all of the major oil companies in the region, been consistently profitable and is the only lab in this region. The larger lab can offer more services to the Lab’s clients both in Alaska and on the mainland. The owners stay on the mainland and only occasionally visit the lab.
The lab is operated on a 24-hour per day/seven day per week basis accepting and analyzing samples in and around the region. It maintains a very high standard of quality control in its analytical services. Their analyses are performed using procedures approved by EPA, ADEC or professional associations such as ASTM, AIHA, AWWA and WEF. Their environmental scientists have more than twenty-five years of experience. They have been providing water, wastewater, microbial testing, and other chemistry testing. They have recently added in-house analysis for total metals, TCLP metals, BOD, TDS, TSS and have very recently added total Benzene and TCLP Benzene.
- Only Lab in this Region of Alaska
- High Growth Potential – potential to double the revenue in 2-3 years
- Buyer can manage it from Mainland
- Buyer can see immediate revenue Growth of 12.5% by hiking the prices by 12.5% (prices have not changed for 7 years and were scheduled to be revised post-COVID
- Significant Barrier to Competition for newcomers – difficult work conditions, impossible to get land leases
- Great opportunity to cross-sell other services your lab provides on mainland
- Revenue: $979K(2020), up from $864K in 2019
- EBITDA: $331K (2020), up from $276K in 2019
- Effective Revenue and EBITDA for the Buyer (after 12.5% price increase): $1.1M and $438K
- Asking Price: Inviting offers at a reasonable EBITDA multiple
Future drilling and expansion are still taking place regardless of the current political climate. Plans are made in terms of five to ten years, not four-year presidential terms. Most of the land in this area is Tribal, Boroughs and State-owned. Contrary to the popular belief by reading papers, it is very likely that the restrictions in the lower 48 states will drive up oil prices and thereby raising the activity in this area. It is very possible for the buyer to double the revenue of the lab in the next 2-3 years with some simple steps and modest investment in personnel and equipment. The most obvious step is to increase the pricing of the various analytical tests – something the lab has not done for the past seven years. It is planning to implement the price increase in 2021, once the Covid is under better control. A modest 10-15% raise will not drive away the customers but will raise both, the revenue and EBITDA by about $100-150K. Another step is to expand the field services which can increase the revenue by $300K-$600k. Other steps include bringing in some more services in-house (soil analysis, and perhaps also stack analysis and crude oil analysis). In 2020, the lab spent about $160K for the testing they sent to outside labs.
It is not an easy area for some outsider to set up an environmental laboratory here. The unique situation of scarcity of space makes it quite difficult for a new competition to enter the market as it is not easy to get a new lease. The lab has a very long term lease and has permission to add another floor to its facility. The buyer will therefore have protection from new competition coming in.
The Lab had a revenue of $979K and EBITDA of $331K in 2020, up from the revenue of $864K and EBITDA of $276,000 in 2019, largely due to recent additions of capabilities (metals and Benzene testing). However, the new buyer will be able to add between 10-15% to the prices immediately and so assuming price increase of about 12.5%, for the buyer, the effective revenue will be $1.1M, and the effective EBITDA would be $438K.