Selling a Water Utilities Business

A water utility’s value usually starts with how dependable the cash flow is under your rate-setting rules, then shifts up or down based on asset condition, near-term capex, and compliance history. Two systems with similar earnings can price very differently if one has a clear rate adjustment path and the other is stuck with frozen rates. Use Rejigg’s free valuation calculator for a ballpark, then tighten it with your rate documents and a realistic 3–5-year capital plan.

No. Brokers charge 5–10% for a process you can run yourself when you have serious buyer access and a clean diligence setup. Rejigg gives you vetted buyers, digital NDAs, a secure data room for rate orders, permits, and asset records, plus deal tracking to compare terms side-by-side. Sellers list for free, and you keep direct control of buyer conversations.

Many water-utility deals take longer than other small businesses because state commission reviews, municipal notices, and other consents can add months. The smoothest timelines happen when rate authority documents, compliance history, and a credible capex plan are ready early so the buyer can start the approval clock sooner. Rejigg helps you stay organized with a data room and closing workflow tied to due diligence and closing.

Sometimes, but it is less common than in service businesses. SBA lenders tend to be cautious with regulated utilities because transfer approvals can be slow, collateral is often underground, and cash flow depends on rate rules. If the deal structure fits the program and your diligence package is lender-ready, an SBA loan can be workable. You can run payment scenarios with Rejigg’s SBA loan calculator before you negotiate.

Buyers usually start with whatever proves you can legally bill and operate: approved rate schedules, franchise or certificate documents, service area maps, operating permits, and a simple compliance history summary. Next comes asset condition evidence like tank inspections, break logs, and a straightforward capex list. Rejigg’s prepare-to-sell guide lays out a practical “first package” checklist.

Approval requirements vary by state and by utility structure, but many transactions require a change-of-control review from a state commission, plus municipal consent under a franchise agreement. Expect a formal application, public notice, and at least one round of questions from the regulator. Timelines are commonly measured in months, not weeks. If you list every required consent early and build the close date around them, surprises drop. Rejigg’s deal tracking keeps the steps visible.

Working capital is the money the utility needs to run day-to-day, like cash to cover power, chemicals, and payroll while waiting for customers to pay. In water utilities, it often includes customer deposits, and it may include restricted reserves required by debt covenants or local policy. At closing, the buyer and seller agree on how much operating cash stays with the business, so the utility does not start out short on cash.

Restricted reserves are usually treated as committed funds, not extra cash, because they are set aside for a defined purpose like debt service or a replacement reserve requirement. Customer deposits typically transfer as a liability since the utility still owes those amounts back when accounts close. This affects the closing statement and any purchase price adjustment, so it helps to reconcile the balances early with a clean ledger and simple supporting schedules.

Give buyers your best estimate, explain how you calculate it, and show what you have done to reduce it. In older or smaller systems, a higher loss number can be understandable if you can tie it to known drivers like aging meters, specific leak-prone zones, or pressure management issues. Buyers get nervous when the number cannot be explained at all because it can mean both physical leakage and billing errors.

A past boil-water advisory does not automatically kill a deal, but buyers will want the whole record: what happened, what you fixed, and evidence the fix held. A one-off pressure event reads very differently than repeated advisories tied to chronic infrastructure problems. Thin documentation slows diligence and can lead to more holdbacks or price reductions. The clean approach is to disclose early, then share the supporting file after an NDA in a controlled way.

Emerging contaminant rules can create real capex risk if monitoring results trigger mandatory treatment. Buyers will ask what you have tested, what the results were, and whether you are likely facing new equipment and operating costs. Uncertainty hurts value because buyers have to assume a worst-case spend. A simple testing summary, plus a clear plan for additional sampling or engineering review, usually keeps this from blowing up late in diligence.

Transfer rules depend on the specific right or permit. Some allow an ownership change with a notice filing, while others require an agency review or a formal assignment process that can take time. Buyers will check required approvals, expected timelines, and whether any conditions could reduce permitted capacity. If you rely on wholesale supply, buyers look at the same issue through the contract: assignability, pricing escalators, and what happens at renewal. Keeping these documents organized reduces timeline risk.

Most buyers view SCADA and controls as reliability and regulatory exposure because a bad control setup can cause service interruptions, water quality events, or reporting problems. Expect questions about remote access, password practices, backups, patching, and who can change setpoints. Older controls are common in smaller systems, so age alone is not shocking. Buyers mainly want a clear risk explanation and a budgetable upgrade path.

Earnouts are less common in regulated water deals because the big variables are rate timing, approval timing, and capital spend, and those can be hard to measure fairly after closing. If you consider one, keep the metric simple and hard to manipulate, and spell out who controls maintenance and capital decisions during the earnout period. Rejigg’s negotiation guide covers practical ways to structure earnouts without constant disputes.

Many buyers want the seller involved long enough to transfer system knowledge, vendor relationships, and the local context with regulators and municipalities. The right length depends on how well the system is documented and whether you have depth behind the certified operator role. If one person holds the map, the contacts, and the routines, a longer transition can prevent outages and compliance slips. Plan the handoff using the transition planning guide.

The issues that most often blow up water deals are missing proof of rate authority, sloppy compliance records, an unknown capex backlog, and surprises about what approvals are required to close. Billing problems can also surface fast, especially if estimated reads are high or the rate table setup is unreliable. Operator coverage risk matters too because lenders and buyers want to know the system can stay compliant through turnover. Most of this is fixable if you surface it early and show clean evidence.

Confidentiality matters in water because employees, municipalities, and regulators can react quickly to rumors. A practical approach is to pre-screen buyers, require an NDA before sharing sensitive material, and stage disclosures so you do not hand over the full file on day one. Rejigg supports this with buyer vetting, digital NDAs, and a secure data room where you control access by document and by buyer. Start with finding your dream buyer.

Compare offers on more than headline price. In water utilities, the real differences often show up in closing conditions and timeline: who owns approval risk, how capex surprises are handled, how working capital and restricted funds are treated, and whether seller financing or holdbacks depend on regulatory outcomes. Put the terms side-by-side so you can see which offer is most likely to close cleanly. Rejigg’s deal tracking and offer comparison dashboard make this easy.