Why do electrical businesses achieve such strong valuations?
Introduction
In the Swiss business acquisition market, companies active in the electrical sector stand out with particularly attractive valuation multiples. Whilst many craft trades struggle to find successors, electrical businesses benefit from strong demand and often trade above sector averages.
This situation is no coincidence. It results from the convergence of several structural factors that protect and reinforce the value of these businesses: growing demand driven by the energy transition, regulatory barriers that limit competition, and proven business models generating stable margins.
For sellers and buyers alike, understanding these mechanisms allows for a more accurate assessment of the value of a construction business specialising in electrical work. This article analyses the five pillars that explain why these businesses achieve such strong valuations and what this means in practical terms for a business transfer.
📌 Summary (TL;DR)
Electrical businesses display above-average valuations thanks to five key factors: structurally strong demand driven by the energy transition and digitalisation, regulatory barriers that protect margins, solid financial fundamentals with stable profitability, a diversified customer base between private individuals and professionals, and attractive EBITDA multiples that reflect the sector's strength.
📚 Table of contents
Structurally strong demand
Electrical services benefit from constant and growing demand in Switzerland. Every building requires installations compliant with ESTI standards, and mandatory periodic inspections generate a regular flow of work.
The energy transition amplifies this trend. The installation of photovoltaic panels, charging stations for electric vehicles and home automation systems creates new rapidly expanding markets. Well-positioned electrical businesses capture this growth.
Switzerland's property stock continues to grow, and energy renovations are multiplying. This structural dynamic ensures electrical craft businesses long-term visibility and strong demand that is relatively insensitive to economic cycles.
Barriers to entry that protect value
The electrician profession is protected by strict regulatory barriers. It is impossible to practise without an electrician's CFC and a federal master's qualification to manage a business. ESTI authorisation is mandatory to carry out electrical installations.
These requirements limit unfair competition and maintain healthy margins. The necessary investments in equipment, vehicles and insurance constitute an additional obstacle for new entrants.
The shortage of qualified labour reinforces the position of established businesses. Training an electrician takes several years, and candidates are scarce. This situation favours craft businesses already operational with a trained team and a solid local reputation.
Solid financial fundamentals
Electrical businesses display attractive financial profiles. Gross margins generally range between 35% and 45%, a level higher than many other construction trades.
Maintenance contracts generate predictable recurring revenues. These regular mandates stabilise cash flow and reduce dependence on new projects. Cash flows are generally healthy thanks to reasonable payment terms.
The diversification of activities (new build, renovation, emergency repairs, maintenance) limits sector risks. This financial stability explains why construction businesses specialising in electrical work attract so many buyers and achieve strong valuations during an acquisition.
A diversified and loyal customer base
Well-managed electrical businesses cultivate a balanced client portfolio: private individuals, local businesses, property management companies, public authorities. This diversification considerably reduces concentration risk.
Maintenance contracts create a lasting relationship with clients. A property management company that entrusts the maintenance of its property portfolio represents stable revenue over several years. Satisfied private clients recommend and return for their new projects.
This natural loyalty constitutes a major intangible asset during a transfer. A portfolio of recurring clients is valued more highly than a volatile portfolio dependent on a few large one-off projects. This is a key factor in the valuation of an electrical business.
Attractive valuation multiples
Well-established electrical businesses generally trade between 4 and 6 times EBITDA. These multiples reflect the quality of fundamentals and the sector's growth prospects.
Several factors influence valuation: the quality of the order book, the rate of revenue recurrence, local reputation, the strength of the team in place and the diversification of the client portfolio.
A business with 40% recurring revenues and an autonomous team will obtain a higher multiple than a structure dependent on its manager. To obtain an initial estimate of your electrical business, the Leez valuation tool provides a range based on recognised valuation methods in Switzerland.
Electrical businesses benefit from structural advantages that explain their attractive valuation in the business transfer market. Demand sustained by the energy transition, protective barriers to entry (qualifications, authorisations, equipment), solid financial fundamentals and a diversified customer base form a reassuring foundation for buyers.
These factors translate into valuation multiples generally above the craft sector average, with transactions often concluded between 4 and 6 times EBITDA for well-structured businesses. The stability of turnover and the recurrence of maintenance contracts further reinforce the attractiveness of these opportunities.
Are you the owner of an electrical business and considering a transfer? Estimate the value of your business free of charge to understand its potential in the market. Are you looking to acquire a business in this sector? Discover the available opportunities and connect with qualified sellers.
