N3 Business Advisors
What Is a Building Automation Business? And How Do You Buy, Value, or Sell One?
Updated: Feb 25
A building automation business – like any other kind of business in the construction industry – offers certain services to residential or commercial building owners looking to automate various systems in their buildings.
Depending on the quality of the services being offered, the size of the business, and the range of clients that the business works for, the business can be valued at a certain selling point for when it is being bought or sold.
In this article, we will look at what a building automation business is and what kind of automation services they provide. We will also take a look at how a building automation business might be valued when being bought or sold, as well as a quick snapshot view of the global market for building automation and how to go about buying or selling the business.
What is A Building Automation Business?
A building automation business is a business that falls under the general umbrella of businesses operating in the construction industry. The main service that a building automation business provides is that of setting up and maintaining a building automation system (BAS).
You may be wondering what exactly a building automation system (BAS) is. In short, a BAS is an essential part of an intelligent building and is the main thing that distinguishes a regular building from an intelligent one.
The system is essentially a network designed to regulate and connect all of the different functions in a building. These functions can include anything from HVAC (heating, ventilation, and air conditioning) all the way to fire alarm systems and security systems.
A BAS ensures that all of these functions and systems can be operated and controlled through a singular set of controls so that the entire building is automated and efficient. In the case of commercial buildings, the different functions of multiple buildings can all be controlled via a singular BAS.
In different parts of the world, various acronyms are used to describe the same kind of system. While we are using the acronym BAS, there are plenty of other examples, including Building Automation and Control Systems (BACS), Building Management and Control Systems (BCMS), Building Management Systems (BMS), and Building Control Systems (BCS).
When it comes to the practical installation of such systems, they are all the same thing, and a building automation business would be responsible for carrying out the installation of the automation systems.
BASs are very often associated with HVAC systems or other kinds of building systems. That is not to say that HVAC companies also provide BAS services, but rather, BASs are used to control HVAC systems and other functioning systems in a building. As such, you may find that certain building automation businesses work hand in hand with HVAC businesses and other businesses in the construction industry.
Most BASs have a number of technical components involved in the overall working of the systems. These components usually involves:
● Input Devices
● Output Devices
● Communications Protocols
● User Interfaces
It is the job of a business automation business to set up a BAS from beginning to end, meaning that all of these 5 essential components come together to make a BAS function will be set up by the business automation business.
How Do You Value a Building Automation Business?
When it comes to buying or selling any kind of business, a professional business valuation is carried out first to gather a correct estimate of the business’s value. It is important to hire professional business valuation experts when deciding to buy or sell any business in order to reach a value that both the buyer and seller can happily agree on and that will accurately represent the value of the business.
When it comes to evaluating a building automation business or any other kind of business in the construction industry, there are various methods that can be used. Let’s take a look at the main approaches that can be taken to value a building automation business:
The Income Approach: The income approach aims to value a business depending on how much income that business is predicted to generate in the next few years. Within the income approach are two subcategories – the discounted cash flow method and the capitalization of earnings method. The discounted cash flow method determines a business’s future cash flow in terms of its current-day value. This method is preferable for newer businesses that haven’t started making much profit yet. Then we have the capitalization of earnings method of valuing a business which takes into account a business’s ROI and cash flows to determine its value. This method is used for businesses with stable profits.
The Asset Approach: The asset approach to valuing a business takes into account the net adjusted assets a business owns in order to determine the business's value. Net adjusted assets mean that all of the business's liabilities are subtracted from its assets. The assets considered for this method include business property, equipment, tools, and intangible assets. In the case of a building automation business, the business is likely to have more valuable intangible assets such as patents, copyrights, worker know-how and expertise, and brand reputation. This approach is best used when a business has various assets to consider – especially real estate. It is also a preferred method in case a business is not making enough profits or if the business is going to be liquidated in the future.
The Market Approach: The market approach is the last approach used to value a business. As you might ascertain from the name, the market approach is an approach whereby a business’ value is determined by comparing the business to similar businesses that have been bought and sold in the market. This approach is especially helpful if you are looking to buy or sell a building automation business in a specific area or based on the local market.
A Snapshot of the Global Market for Building Automation
As mentioned above, a great way to value a building automation business is through the market approach. While it can be helpful to see the value for which individual building automation businesses are being bought and sold, it can also be advantageous to have a general idea about the size and growth of the global market.
When it comes to the global market for building automation, the market is expected to reach a value of US$148.6 billion by the year 2027. This shows us an estimated 11.4% growth in CAGR in the forecast period.
The main reason why the market for building automation – and subsequently the number and size of different building automation businesses – is growing is the increased demand for energy-efficient, intelligent, and automated buildings. The combination of building automation technologies and components with the IoT has meant more advanced BASs and fewer technological restraints.
Another reason for the growth of the global building automation market is the increased focus on reduced energy consumption and greater energy efficiency. With sufficient building automation, buildings can cut down the energy used by their HVAC systems, fire alarm systems, lighting systems, and other functioning systems by up to 30%. In addition, the general maintenance costs of any building can also be cut down with an effective BAS.
As the value of the global market for building automation continues to rise, we can expect a rise in the number of existing building automation businesses as well as a rise in the number of building automation businesses being bought and sold. As such, the value of these buildings will also rise according to the rising market value for BASs and other relevant technologies and services.
How to Go About Buying or Selling a Building Automation Business
When it comes to buying or selling a building automation business, the first step would be to get in touch with a business advisory company – ideally, a company like N3 Business Advisors that focuses on mergers and acquisitions within the construction industry.
A business advisory company has the professional expertise to help you buy a profitable company and carry out due diligence and an accurate valuation before making a purchase. If you wish to sell your building automation business, an advisory company can help you develop a business growth plan, a sale plan, put up your business for listing, and various other things that need to be done to prepare a business for sale.
Before a building automation business is sold or right after one is bought, the owner would ideally want to grow the business and ensure that it is profitable and able to keep up with the market competition. Some of the ways a business can be prepared for sale include growing the business’s services and offering greater flexibility.
It also includes ensuring that the employees are sufficiently trained in installing and managing all BAS technologies and components, as well as building up a strong business management team. As for the people that are absolutely essential in running a successful and profitable building automation business include a managing director, a software/program manager, an installation expert, and a trained technician.
A business advisory company would be able to help you find a building automation business to buy by showing you the listings and helping you determine which business to buy or by helping you prepare your own business for sale and listing it on the market. The process of valuing, buying, or selling a business all starts with a business advisory team.
The Bottom Line
As global trends in energy conservation and intelligent buildings are on the rise, the demand for building automation systems (BAS) is increasing. As such, there can be an expected rise in the number of building automation businesses in most areas. With more and more businesses cropping up, there can also be an expected rise in how many of these businesses are bought and sold in the near future.
In this article, we talked about what exactly a building automation business does – mainly that it provides the services of BAS installations and maintenance. We also discussed how a building automation business can be valued using various valuation methods, including the income approach, the assets approach, and the market approach. And finally, we discussed the importance of working with a business advisory company if you want to value, buy, or sell a building automation business.
N3 Business Advisors - Construction Industry Mergers & Acquisition Advisors
If you are looking for a team of experienced and professional business advisors to help you buy or sell a company in the construction industry – such as a building automation business – then N3 Business Advisors is the best company to help you.
No matter what goal you are hoping to achieve, be it company growth, merging or acquiring, preparing your business for sale, evaluating a company, carrying out due diligence, or meeting any other company goals, we have a qualified and diverse team that can help you out.
N3 Business Advisors has over 30 years of experience working with companies in the construction industry. Our team comprises lawyers, due diligence experts, valuation experts, business advisors, accounts and financial advisers, and other professionals who can help you achieve your company's goals.
If you want to set up a confidential consultation with N3 Business Advisors, visit our website, or call us at 647 967 4222. N3 Business Advisors is based in Ontario, and our office is at 55 Village Centre Place, Suite 200, Mississauga, ON L4Z 1V9.