Kingsway Financial Services (KFS) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of Bud's Plumbing aligns with a strategy to build a skilled trades platform focused on service businesses with strong recurring revenue, high margins, and asset-light models.

• Bud's Plumbing, with a century-long history and a strong reputation in Evansville, Indiana, fits the criteria for long-term secular growth and recurring customer relationships.

• The deal leverages Bud's strong customer base and service reputation in the Evansville, Indiana market.

• The platform targets mid-sized cities for M&A opportunities at attractive valuations and aims to build a scalable national platform.

• Acquisition expands Kingsway's presence in skilled trades, aligning with the Xcelerator platform strategy.

Financial terms and conditions

• Bud's Plumbing was acquired for $5 million, consisting of $3.75 million in cash and $1.25 million in seller debt financing, plus transaction expenses and a working capital adjustment.

• The business generated $6 million in unaudited revenue and $800,000 in adjusted EBITDA for the 12 months ending October 2024, representing a 0.8x revenue and 6.0x EBITDA multiple.

• Funding was primarily from the issuance of 240,000 shares of Class C preferred stock at $25 per share, raising $6 million.

• Seller debt is structured as a five-year promissory note with equal monthly payments.

• Transaction structured as a purchase of all issued and outstanding membership interests.

Synergies and expected cost savings

• Some back-office functions, such as recruiting and insurance, will be consolidated to leverage scale and specialization.

• Most operations will remain decentralized to preserve local business strengths.

• Acquisition expected to be immediately accretive to Kingsway's earnings.

• Platform enables future organic growth and additional acquisitions in skilled trades.