Selling a facilities services business: contracts, labor rules, and what buyers check

This guide covers integrated facility services, building maintenance, janitorial-plus, and multi-service contractors serving commercial buildings. It is general information, not legal advice; the rules below depend on your jurisdiction, contracts, and deal structure, so confirm them with your attorney. If cleaning is most of what you do, see our page on selling a janitorial or commercial cleaning business; for the sector overview, see M&A advisory for facilities services companies.

How do buyers separate base work from project work?

In its annual report for the year ended October 31, 2025, ABM Industries, a facility services company with about 113,000 employees, describes contracts billed as a fixed monthly fee, per square foot, per hour, or cost-plus, where clients reimburse agreed wages, benefits, and other costs plus a margin. It separately describes work orders as supplemental services outside the standard specification, such as cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal, and treats them as short-term, one-off contracts (ABM Form 10-K, fiscal 2025).

Buyers draw the same line in your numbers. Base scope repeats monthly at a known price, so it carries most of the value. Project and tag work may be profitable, but nobody can assume a flood or a heavy snow year will recur, so it is valued more conservatively or on a multi-year average. A company whose margin leans on extras will see that in the multiple (EBITDA multiples explained covers what moves it). Project work written into the scope on a schedule, such as quarterly floor care, has a stronger claim to being treated as recurring than the same work billed as it comes up.

Why does route density matter?

The same account can be worth more to one buyer than another. Clustered sites let one supervisor, relief crew, and equipment pool cover more buildings, so a buyer with branches near yours can absorb your accounts with little added overhead. Map your sites, supervisor coverage, and drive times, and separate self-performed from subcontracted scope, since a subcontractor’s margin comes out of yours.

What do your contracts actually promise a buyer?

Less than the stated term suggests. ABM says it primarily provides services under agreements cancelable by either party on 30 to 90 days’ notice, that most of its contracts can be cancelled without a substantive penalty, and that where a contract has a cancellation clause, it treats the remaining term as limited to the notice period. A buyer will read yours the same way: termination for convenience first, stated term second. Value comes from evidence that customers stay anyway: years of tenure, renewals, and rebids won.

Assignment is the second issue. In an asset sale, each contract has to move to the buyer, and anti-assignment language means getting consent. In a stock sale, the contracting company stays the same, but change-of-control clauses can still require notice or consent. National accounts, institutional landlords, and public agencies are the likeliest to have these clauses, and some will treat a sale as a reason to rebid. Which contracts need consent, and from whom, shapes the structure.

Federal contracts and novation

The Anti-Assignment Act, 41 U.S.C. 6305, prohibits transferring a federal contract or any interest in it. Under FAR 42.1204, the government may, when it is in its interest, recognize a buyer of all the contractor’s assets, or the entire portion used to perform the contract, as successor through a novation agreement. None is needed when ownership changes through a stock purchase with no legal change in the contracting party. If the government does not agree to a transfer, the original contractor remains bound. Confirm the current text with counsel.

How do worker retention laws affect a sale?

Several jurisdictions require a contractor taking over building service work to keep the incumbent’s site staff for a transition period. Four examples, from each law’s published text:

California says the incoming contractor need not pay the same wages or benefits. New York City lets the new employer set terms after the transition and exempts workers earning more than $47.93 an hour as of January 1, 2026, a threshold it adjusts yearly. New Jersey’s law does not apply if the incoming employer agrees to be bound by the existing collective bargaining agreement, and it overrides local retention rules for service employees. New York City and New Jersey also reach changes in control of a building, not only changes of contractor.

For a seller, these laws cut two ways. Where they apply, a customer can change contractors and keep most of the same crew, so your workforce is not what holds an account; service quality and the relationship are. And a buyer that wins new accounts in these markets inherits the incumbent’s staff, which limits the labor savings it can model. Whether a law reaches the sale of your company itself depends on its wording and your structure; ask counsel, especially about an asset sale in which a customer re-awards the work instead of consenting to assignment.

Can your pricing keep up with wage increases?

Labor is most of what you sell. ABM reports direct labor costs of 68% of revenue in fiscal 2025. It warns that minimum wage increases can force raises for employees already above the minimum, and that where contracts fix the rates clients pay for certain costs, costs above those rates cut profit.

California’s statewide minimum wage is $16.90 an hour for 2026 and is adjusted each year for inflation, with any single year’s raise capped at 3.5% (California Department of Industrial Relations). New York lists $17.00 an hour in New York City, Long Island, and Westchester and $16.00 elsewhere, and says the rate will stay the same on January 1, 2027, because the conditions for one of the law’s off-ramps from inflation indexing have been met (New York State Department of Labor). Indexing is not a forecast to count on in either direction.

So buyers read the price adjustment clause in every contract. Language that passes through increases in minimum wage, union scale, or benefit costs protects margin without a renegotiation. Fixed pricing for a multi-year term leaves the buyer underwriting the risk that labor costs outrun the contract. Cost-plus shifts much of that risk to the customer.

Federal work adds a successor rule: under the Service Contract Act, a successor contractor must pay at least the wages and fringe benefits, including prospective increases, due under the predecessor’s collective bargaining agreement, unless the Department of Labor finds after a hearing that they differ substantially from local prevailing rates (41 U.S.C. 6707(c)). Executive Order 14055, which required offering jobs to a predecessor’s workers, was revoked in January 2025, and its rules were rescinded effective December 22, 2025.

Which labor compliance issues come up in diligence?

The items most likely to produce an indemnity, an escrow, or a reworked structure:

• Classification. Crews paid as independent contractors, or subcontractors who are effectively employees, get close review. California presumes a worker is an employee unless the business shows the worker is free from its control, works outside its usual course of business, and is independently established in that trade (Labor Code section 2775). The federal standard is in flux: the Department of Labor proposed in February 2026 to replace its 2024 rule.
• Overtime. Federal law requires time and a half for hours over 40 in a workweek; California adds daily overtime after eight hours. Hours worked at different sites for the same employer count together, so anyone covering more than one site deserves a specific check.
• California janitorial registration. Janitorial employers there must register with the Labor Commissioner every year, face a fine of $100 a day up to $10,000 for operating unregistered, and must provide in-person sexual violence and harassment prevention training every two years. Customers who hire an unregistered employer face fines too (Labor Commissioner’s Office).
• Union agreements and pension exposure. Buyers read every union agreement and ask about multiemployer pension plans. An employer that withdraws from one owes withdrawal liability, its allocable share of the plan’s unfunded vested benefits (29 U.S.C. 1381). On written request, the plan must estimate that liability within 180 days, once in any 12 months (29 U.S.C. 1021(l)). Some large acquirers are heavily unionized (about 45% of ABM’s employees were covered at October 31, 2025), but the exposure is still priced.

How do insurance and claims history affect value?

Your claims record follows the business. Workers’ compensation experience rating compares an employer’s actual losses with the losses expected for employers in the same classification, and the resulting modification is a component of what you pay for coverage. According to the National Council on Compensation Insurance, when an owner sells a company, its experience transfers to the new owner, and employers must report sales, mergers, and new entity formation (NCCI, 2020). Some states run their own rating bureaus and rules, so check how yours handles a change of ownership. Expect requests for mod worksheets, several years of loss runs across workers’ compensation, general liability, and auto, and open claims with reserves.

Large acquirers often self-insure: ABM retains a substantial portion of the risk on certain workers’ compensation and medical claims and reported $660.1 million of insurance claims liabilities at October 31, 2025. To such a buyer, your loss history previews its own costs, and a poor one comes out of the price.

How does customer concentration change the deal?

Concentration changes the structure of a deal. Even at ABM, where no client exceeded 10% of consolidated revenue in fiscal 2025, one client was about 32% of its Manufacturing & Distribution segment. When one account carries a large share of your gross profit, expect an escrow, a holdback, or an earnout tied to that account renewing. Count concentration by property manager and landlord too, because one management company can move several buildings at once. If those relationships run through you, see our guide to the owner-dependent business sale.

Who buys facilities services companies?

Three groups, each described through its own announcements or filings. Naming them implies no relationship with Wraith.

• Public integrated facility services companies. ABM, which says it mainly competes with regional and local owner-operated companies, bought Quality Uptime Services, a data center power systems maintenance company, in June 2024, and LMC FM, a Dublin facilities services company, in June 2025. It completed its purchase of WGNSTAR, a workforce and equipment support provider to the semiconductor and high-technology industries, on February 4, 2026.
• Private equity-backed platforms. Greenbriar described its 2022 investment in The Facilities Group, founded as a consolidator of what it called the highly fragmented janitorial services and facilities maintenance sector, as support for growth and acquisitions. In July 2026, CCS Facility Services, a Silver Oak Services Partners portfolio company, announced it had added Alabama Cleaning Service under a strategy focused on expanding geographic density.
• Regional operators. CleanPower, a Wisconsin facility services provider and subsidiary of Marsden Services, completed its acquisition of Advance Janitorial, a Wisconsin Rapids contractor in business since 1975, on August 1, 2025, to expand its services in the state.

How are facilities services deals usually structured?

The choice between a stock sale and an asset sale changes more than taxes here.

• Customer contracts. Asset sales need assignment and often consent; stock sales may trigger change-of-control clauses.
• Federal contracts. Asset transfers need novation; qualifying stock purchases do not.
• Multiemployer pensions. An asset sale can be a withdrawal unless, in an arm’s-length sale, the buyer agrees to contribute for substantially the same number of contribution base units, posts a bond or escrow for five plan years, and the seller stays secondarily liable for that period (29 U.S.C. 1384).
• Wage claims in California. A successor janitorial employer can owe its predecessor’s unpaid wages, damages, and penalties if it meets any one of several tests, such as sharing ownership or management with the predecessor, or using substantially the same workforce for substantially the same services, unless it kept that workforce under the displaced janitor law (Labor Code section 1434). An asset sale does not by itself leave those claims behind.

Price terms then follow the risks diligence found. ABM’s purchase of LMC is a public example: its fiscal 2025 annual report describes about $22.5 million in cash plus up to $5.8 million payable in 2027 upon the retention of LMC’s top two customers. Escrows for labor or claims exposure, holdbacks tied to account retention, and earnouts work the same way; our guide to seller financing and earnouts explains how to negotiate them.

What should you prepare 12 to 24 months before a sale?

• A contract file. Every account’s signed agreement, term, renewal mechanics, notice period, termination, assignment, change-of-control, and price adjustment language, with consents flagged.
• Account history. Start date, monthly revenue split into base and project, and every account lost in the last five years, with the reason.
• Site labor data. Wage rates, scheduled hours, and seniority by site, noting sites under retention laws.
• A compliance review. Classification, multi-site overtime, breaks, work authorization records, and registrations, fixed before a buyer finds them.
• Union and pension figures. Every collective bargaining agreement and a withdrawal liability estimate from each multiemployer plan.
• Insurance records. Experience modification worksheets, loss runs, open claims, and your safety program.
• Management depth. Account managers who hold customer relationships and will stay.
• Normalized earnings. Adjusted EBITDA with every add-back documented. What is my business worth covers how buyers build that figure, and our valuation calculator gives a first indication.

That window allows time to reprice fixed-price contracts at renewal and build a retention record a buyer can verify.

Where should you start?

With your contracts and your labor model, because that is where a buyer starts. To see how yours are likely to read to an acquirer, and what that means for value, begin with a confidential valuation. It is a private conversation about what your company is worth and why, with no obligation to sell.

Sources

• ABM Industries Incorporated, Annual Report on Form 10-K for the fiscal year ended October 31, 2025 (contract types, cancellation terms, labor costs, collective bargaining coverage, insurance reserves, client concentration, competition, LMC and Quality Uptime acquisitions). sec.gov
• ABM Industries, “ABM Expands Semiconductor and Technical Services Platform with Agreement to Acquire WGNSTAR,” press release, December 17, 2025, filed as Exhibit 99.2 to Form 8-K. sec.gov
• ABM Industries, Quarterly Report on Form 10-Q for the quarter ended July 31, 2026, Note 3, Acquisitions (WGNSTAR completed February 4, 2026). sec.gov
• 41 U.S.C. 6305, Prohibition on transfer of contract and certain allowable assignments. law.cornell.edu
• Federal Acquisition Regulation 42.1204, Applicability of novation agreements, accessed October 26, 2026. acquisition.gov
• California Labor Code sections 1060 and 1061, Displaced Janitor Opportunity Act. leginfo.legislature.ca.gov
• New York City Administrative Code section 22-505, Displaced Building Service Workers, as published by the Department of Consumer Affairs (text current as of January 2017). nyc.gov
• NYC Department of Consumer and Worker Protection, Displaced Building Service Workers Protection Act (2026 wage threshold), accessed October 26, 2026. nyc.gov
• D.C. Code sections 32-101 and 32-102, Displaced Workers Protection. code.dccouncil.gov
• New Jersey P.L.2023, c.128 (C.34:21-16 et seq.), approved July 24, 2023. pub.njleg.state.nj.us
• California Department of Industrial Relations, Minimum Wage Frequently Asked Questions, accessed October 26, 2026. dir.ca.gov
• New York State Department of Labor, Minimum Wage, accessed October 26, 2026. dol.ny.gov
• 41 U.S.C. 6707(c), Preservation of wages and benefits due under predecessor contracts. law.cornell.edu
• U.S. Department of Labor, Wage and Hour Division, final rule rescinding 29 CFR part 9 (Nondisplacement of Qualified Workers Under Service Contracts), Federal Register, December 22, 2025. govinfo.gov
• California Labor Code section 2775 (employee status test). leginfo.legislature.ca.gov
• U.S. Department of Labor, Wage and Hour Division, independent contractor rulemaking, accessed October 26, 2026. dol.gov
• 29 U.S.C. 207(a)(1), maximum hours. law.cornell.edu; California Department of Industrial Relations, Overtime Frequently Asked Questions. dir.ca.gov
• California Labor Commissioner’s Office, Janitorial Registration Frequently Asked Questions (registration, fines, training), accessed October 26, 2026. dir.ca.gov
• California Labor Code section 1434 (successor employer liability). leginfo.legislature.ca.gov
• 29 U.S.C. 1381 (withdrawal liability), 1384 (sale of assets), and 1021(l) (liability estimates). law.cornell.edu
• National Council on Compensation Insurance, “Basics of Experience Rating,” presentation to the National Council of Insurance Legislators, December 11, 2020. ncoil.org
• Greenbriar, “The Facilities Group Welcomes Strategic Growth Investment by Greenbriar,” February 8, 2022. greenbriar.com
• CCS Facility Services, “CCS Facility Services Expands Southeast Footprint with Addition of Alabama Cleaning Service,” company announcement, July 2026, as republished by ISSA. issa.com
• Marsden Services, “CleanPower Acquires Advance Janitorial,” August 19, 2025. marsden.com