Why Some Testing, Inspection and Certification Companies Sell for More than Others.

/in , /by Adam Wiskind

Testing, Inspection, Certification (TIC) companies play a crucial role in various industries, from agriculture to manufacturing to construction, by providing services that verify adherence to standards, regulations, and specifications. TIC services are typically nondiscretionary, regulation driven, recession resistant, and predictable, which makes businesses in this sector a priority investment opportunity for private capital and strategic investors.

However, owners of TIC companies that are preparing to sell should know that in the eyes of an investor, not all TIC companies are created equal.  Beyond financial performance, companies that are built to reduce risk and ensure long term growth are more valuable to potential buyers. Companies in this sector that exhibit the features below will be particularly attractive to investors:

  1. Critical-Path Service Offering: TIC companies that occupy a vital position in the business ecosystem by providing solutions to regulatory safety and quality control requirements. They act as gatekeepers, ensuring that products meet stringent standards before reaching the market. TIC businesses that fulfill regulatory or industry requirements become essential partners for customers striving to maintain compliance and uphold consumer trust.
  2. Turnkey Solution Offerings: TIC firms that offer turnkey solutions that comprehensively address customer needs. From initial assessments to ongoing compliance monitoring, these companies provide end-to-end services that streamline processes and alleviate the burden on clients. By offering integrated solutions, TIC businesses simplify complex regulatory requirements, enhancing efficiency and peace of mind for their customers.
  3. Depth of Customer Relationships: TIC companies that cultivate long-term and contractual relationships with their customers. These enduring partnerships are built on trust, reliability, and a proven track record of delivering value. By understanding their clients’ unique needs and challenges, these TIC firms become trusted advisors, securing recurring revenue streams and fostering loyalty in a competitive market landscape.
  4. Technology-Enabled Services: Leading TIC companies leverage technology to offer products and services that are more efficient, consistent, and precise. Advanced laboratory equipment, data analytics, and automation tools enable these firms to conduct tests and inspections with unprecedented accuracy and speed. By embracing technological advancements, these TIC businesses enhance their competitive edge and deliver superior outcomes for clients.
  5. Technical Expertise: The cornerstone of TIC services lies in the technical expertise of their workforce. Companies with highly trained and experienced labor forces excel in conducting rigorous tests, interpreting complex data, and providing actionable insights to clients. Investing in ongoing training and professional development ensures that TIC firms remain at the forefront of industry standards and best practices.
  6. End Market Diversity: TIC businesses that serve customers across a wide range of industries. End market diversity not only mitigates risk but also exposes TIC firms to diverse growth opportunities and emerging trends in various industries.
  7. Dedicated Training and Workforce Development: TIC companies that prioritize employee development reap rewards. By investing in training programs, certifications, and skill enhancement initiatives, these firms cultivate a highly skilled and motivated workforce. A well-trained labor force not only benefits service quality but also drives innovation and operational excellence, fueling long-term growth and profitability.
  8. Sales Pipeline Development and Conversion: A robust sales pipeline is indicative of a TIC company’s growth potential. Companies with effective sales strategies and strong lead generation mechanisms consistently attract new clients and opportunities. Moreover, a demonstrated ability to convert leads into contracts underscores a TIC business’ competitiveness and market position.
  9. Broad Service Area: TIC companies with large service areas enjoy distinct advantages in terms of market reach and scalability. Regional and national-scale operations enable these firms to serve clients across diverse geographic regions, tapping into regional market dynamics and regulatory landscapes. Furthermore, a broad geographic presence enhances brand visibility and competitiveness in the marketplace.

Owners of TIC companies that are preparing to sell their business will optimize their results by building these features into their companies. Investors seeking stable returns and long-term growth opportunities see TIC businesses as a compelling investment proposition.  But in addition to financial performance both financial and strategic investors are particularly interested in companies that are differentiated by features that create defensible and enduring moats for their product and services.

Exit Strategies Group helps business owners to value and exit their testing, inspection and certification companies.  If you’d like to have a confidential, no commitment discussion on your exit plans or have related questions, please contact Adam Wiskind, Senior M&A Advisor at (707) 781-8744 or awiskind@exitstrategiesgroup.com