Community Spotlight

Q&A: Mike Bourgeois on Buying Distress With the Downside in Mind

When Mike Bourgeois and his search partner acquired Cardinal Heating & Air in December 2025, they were doing something most first-time buyers are taught to avoid. The Kirkland, Washington HVAC company was generating roughly $12-$15 million in annual revenue but losing about $3 million per year. Bourgeois had spent 8 years in the Air Force and later worked in finance, but neither he nor his partner had operating experience in HVAC. They had searched for roughly a year and a half before finding Cardinal and completed the deal after a 30-day diligence period.

His background as a deep-value investor pushed him to start with the downside. The purchase price is undisclosed, but he says liquidation value was central to the decision: if the turnaround failed and they had to sell the company's assets, they believed they could recover roughly what they had invested. If things went well, they thought Cardinal could eventually produce $1 million to $1.5 million of EBITDA.

Cardinal did not have a demand problem. Revenue had historically ranged from roughly $12 million to $15 million, with a peak near $16 million, and the company had previously generated up to $2 million in EBITDA. Pricing, expenses, job mix, controls, and management had deteriorated. In some cases, Cardinal was selling parts to customers for less than it paid vendors, while certain prices had not been properly updated since before COVID. 

Bourgeois and his partner started with the P&L. During their first two weeks, they went line by line through accounts payable and eliminated expenses they could not justify, cutting roughly $1.4 million of annualized costs. One example was the company's cell-phone bill, which was running about $10,000 a month before they reduced it to roughly $3,000.

Cardinal introduced several rounds of price increases, improved job costing, and began tracking gross profit at the individual-job level. The company also reduced its exposure to new construction, where long-duration fixed-price contracts had been damaging margins, and shifted the business toward residential service and installation, which now represent roughly 85-90% of the mix. Gross margins that had averaged around 15-20%, and had fallen as low as 7% in one month, subsequently climbed to roughly 48-49%.

The company had 61 employees when they bought it and already had capable managers and specialists in place. He and his partner initially stepped on some toes before recognizing how much institutional knowledge already existed inside the business. They subsequently implemented EOS, pushed managers to communicate across departments, and worked to replace a siloed culture with one where frontline employees could contribute ideas.

Most businesses are distressed for reasons that are difficult or impossible to fix. Cardinal worked as an acquisition thesis because Bourgeois believed he could identify why the company was losing money, saw evidence that the underlying demand and brand still existed, and built downside protection. The upside mattered, but the first question was what he could lose.

Governance Feed

1. Axial’s 2H 2026 survey found that 91% of dealmakers expect buyer competition to remain steady or increase, yet only 45% of buyers say they are willing to stretch on valuation. Valuation expectations were cited by 57% of respondents as the leading reason deals failed in the first half of 2026, while QoE EBITDA discrepancies accounted for 21.3% of broken LOIs in Axial’s latest dead-deal analysis. There are still plenty of buyers for good businesses, but clean earnings and a price that works with today’s financing costs matter more than ever.

2. Capstone Partners reports that aerospace and defense deal volume rose 10.3% in 2025, while disclosed enterprise value jumped 73.1%. Transactions averaged 3.0x revenue and 11.4x EBITDA. The momentum carried into Q1 2026, with deal volume up 37% year over year and $47.1 billion of disclosed value, although average EBITDA multiples eased to 9.5x. Component manufacturing, defense technology, cybersecurity, government services, and other fragmented niches continue to attract strategic and sponsor-backed buyers looking for scale.

3. Everbridge Group notes that one in five strategic dealmakers surveyed by Bain walked away from a transaction in the past year because of concerns about AI’s impact on the target. Buyers are increasingly testing both sides of the issue: whether AI could weaken the durability of a company’s earnings, and whether the target’s existing AI use creates data, confidentiality, or IP liabilities. For buyers, that adds AI tool usage, customer contracts, data handling, and business-model exposure to the diligence checklist.

Thesis Principle

A non-compete signed as part of a business sale is enforceable in most states, even in states that limit employment non-competes. The buyer is paying for goodwill, and the agreement exists to protect that purchase. Market terms for a $1 million to $10 million sale typically run for 3 to 5 years, with a geographic scope that matches where the business actually operates. Activity scope deserves close attention because an overbroad clause can prevent the seller from consulting, investing, or starting an unrelated company in the same industry. Sellers who plan to stay active after closing should negotiate that language before signing the letter of intent.

Resources & Events

📅 Advanced Wealth Strategies for Post-Liquidity Planning (Norco, CA - September 24, 2026) 

The Exit Planning Institute’s Inland Empire Chapter will host a two-hour session at Hidden Valley Golf Club focused on what happens after a business sale. Presenter Jeni Ahern will cover tax-efficient planning, liquidity management, estate strategy, risk, and sustainable income, with an emphasis on coordinating those decisions early so owners can preserve and deploy sale proceeds more effectively. The event is free for members, $25 for member guests, and $50 for non-members. Details →

📅 Middle-Market M&A (Deal, NJ - September 16, 2026)

The Exit Planning Institute’s New Jersey Chapter will bring together business owners and advisors for a discussion on the current middle-market M&A environment, including roll-up activity, buyer priorities, valuation drivers, and common reasons companies are not ready to transact. The session will also compare exit structures and outline steps owners can take to strengthen deal readiness before going to market. The event is free for members and $55 for non-members. Details →

📊 Report Spotlight: Building & Infrastructure Services Q2 2026 Report (FOCUS)

FOCUS Investment Banking’s Q2 2026 Building & Infrastructure Services report shows M&A activity holding near record levels, with 380 transactions, up 3.3% from Q1. Environmental & Facility Services was the standout, with deal count more than doubling from 29 to 59, while Engineering & Construction rose 10.4% to 85 deals. Strategic and PE-backed buyers continue to account for roughly nine out of ten transactions, favoring businesses with recurring or contracted revenue, stable workforces, and exposure to data centers, power infrastructure, and regulatory-driven modernization. The market remains selective, but specialized, regionally strong operators continue to attract significant buyer interest. Read →

For the Commute

An Owner & Her M&A Advisor Tell All (The M&A Mastermind Podcast)

Merry Korn built Pearl Interactive Network into a 1,300-employee social enterprise before selling the company with investment banker Sharon Heaton of sbLiftOff. The conversation covers how Korn planned for the exit, why she rejected several buyers before finding the right fit, and how GovCon-specific expertise influenced the transaction. It also covers valuation expectations, buyer reputation, culture, and the relationship between an owner and an advisor during the sale process. For owners who are still a year or two from a transaction, the episode offers a look at how preparation, buyer selection, and advisor fit can shape an exit.