Listing ID: 72619
Extremely well organized and profitable. Rebuilding America’s infrastructure.
Could there be anything more boring than nuts and bolts? Why would anyone want to get involved with such mundane products in this age of exciting Internet opportunities, high-margin specialty goods, and well-known franchises?
But what if those nuts and bolts were the essential components of a coming boom in the rebuilding of U.S. infrastructure?
Top investment analysts have identified this fundamental sector as one of the most interesting segments of the broad market. And industry professionals are equally excited. Take a look at just one of the areas of concern, water systems:
“The price tag for the critical upkeep and replacement of the nation’s outdated water systems is at least $1 trillion over the next 25 years, per American Water Works Association estimates.”
(Walter Lynch, C.O.O. of American Water, writing in American Infrastructure Magazine.)
“Of course,”, you might say. “That is all well and good for a company with the ability to play at that level. But this is just a small company, right?”
You might go on to say, “It would have to be a company with precise business process management and superb analytics, right? It would have to be a company that can handle very large contracts, no?”
Well, I’m pleased to report that this business has been groomed with just those capabilities, for just this time.
The only reason it is on the market is that the owners are ready to retire. They have purposely invested in the company so the next owner can step into the coming growth curve.
Growth, Expansion, Scalability
A solid foundation spanning decades of customer-centric relationship building is one thing, but by itself it would not be sufficient to handle quantum-scale national infrastructure growth
This company has clearly defined its Business-to-Business model and has made the changes necessary to handle the demands of large-scale purchases and contracts. It is literally now on the cusp of putting that investment to work. Information management systems, business processes, standard operating procedures, they’re all in place and working well.
The owners are willing to provide substantial transition support to assist the buyer in taking advantage of the burgeoning growth opportunities. They have invested in their own company infrastructure at a level seldom seen, and it will take some orientation for the new owner to fully utilize it. There will be an intensive hands-on support for the first thirty days, to be followed by a consulting arrangement if the buyer wishes.
SBA lending has become more accommodating in the past year and a half, and especially now as the agency works to support the economic recovery. They have loosened some of their previous stringent standard operating procedures, and the result is a higher loan to value ratio to qualified buyers. Down payments of less than 20% are now common.
The essence of loan qualifying is still the historical Debt Service Coverage Ratio, along with the usual creditworthiness and collateral considerations. This company is highly financeable on the debt service coverage ratio and collateral part, and the buyer will need to be qualified on the creditworthiness part.
We have some of the best SBA lenders in Oregon to assist the Buyer, and they get very creative when the need is there.
When we’re talking about significant growth into regional and national infrastructure projects, it is essential to know that the subject business will be able to handle it.
In short, it has the requisite warehouse and office space, the supply chain management systems, and the highly articulated inventory management system required to operate at a 10X level.
The industrial zoned warehouse is approximately 16,800 sq. ft. on .68 acres. There are multiple office areas and stations comprising 1680 sq. ft., and 3 ADA bathrooms. There are 24 parking spaces.
The owners of the business will provide a market-rate lease to the buyer, to provide long-term stability to accommodate growth.
One might think that there must be a plethora of competitors in such a commonplace industry. Even the local hardware store can sell nuts and bolts, right? And the big box stores can purchase them in quantity and sell at low prices, right?
The problem with this assumption is that it fails to take into account the barriers to entry that this company has erected. For example, there are very few companies that can provide lot-controlled fully traceable fasteners that meet the very stringent specifications for the construction industry.
And no ordinary hardware store could begin to manage the thousands of individual specialty items that this company offers. Some the big-box stores might have the computing horsepower, but their business model focuses on a relatively few common items for the homeowner, the do-it-yourselfer, and the local contractor.
So it comes down to having the proven capacity to handle big government jobs with specialized approval processes, in large quantities of goods. Can this company do that? Has it done that? Yes, and yes.
As is customary in the sale of a business, all of the assets (tangible and intangible) used to operate the business are included with the sale. There are no encumbrances, they will be conveyed free and clear at closing.
One of the most interesting aspects is that the business has amassed a large, on-hand inventory. This is an especially important feature in today’s supply-chain environment with its many and varied interruptions and delays.
Inventory levels (and replacement costs) vary day by day as one would expect. The inventory will be conveyed to the Buyer at replacement cost at closing (in addition to the base purchase price, which is based on operating cash flow.)
For estimating purposes, the book value of the inventory is presently $671,746. The value of the inventory (at the then-current replacement cost) will be added to the base purchase price at closing.
Clearly, this company is poised to play a significant role in America’s upcoming infrastructure rebuilding project. It has the requisite systems, relationships, trained staff, and information management capacity to operate at a level orders of magnitude greater than its history might imply.
The ideal buyer profile includes a company already involved with government infrastructure contracts, that wishes to acquire a superbly organized business to handle this segment of its operations.
Alternatively, a business owner in this sector who aspires to grow the capacity to handle larger public sector contracts would be well advised to take a look at this small closely held company.
As a private company asset sale, the market determines that it is priced in the context of its demonstrated historical cash flow. At the next level up, a public company would be valued in the context of its projected earnings on a pro forma basis.
This difference alone justifies labeling this acquisition an “unusual opportunity.”
- Asking Price: $1,295,393
- Cash Flow: $278,597
- Gross Revenue: $2,203,378
- EBITDA: $278,597
- FF&E: N/A
- Inventory: $671,746
- Inventory Included: N/A
- Established: 1969
- Property Owned or Leased:N/A
- Property Included:N/A
- Building Square Footage:16,800
- Lot Size:N/A
- Total Number of Employees:10
- Furniture, Fixtures and Equipment:N/A
Clean, well-organized 16,800 sq. ft. warehouse with multiple office spaces and 3 ADA bathrooms. Modern QR-Code inventory management system (capable of handling Industrial and government infrastructure contracts.)
The owners will provide 30 days of on-site support and orientation to the management systems, customers, and supply chain. Thereafter, they will enter into a consulting arrangement if the buyer wishes.
There are very few fastener businesses that compete at this level.
The market is strong and getting stronger as government infrastructure rebuilding contracts are being approved. This company has the necessary inventory, supply chain, and management systems to compete at that level.
The company was founded in 1969, making the business 53 years old.
The deal doesn't include inventory valued at $671,746*, which ins't included in the suggested price.
The business has 10 employees and is situated in a building with approx. square footage of 16,800 sq ft.
The property is leased by the business for $0.00
Why is the Current Owner Selling The Business?
There are all kinds of reasons people decide to sell businesses. Nevertheless, the true factor vs the one they say to you might be 2 absolutely different things. For instance, they might state "I have a lot of various responsibilities" or "I am retiring". For many sellers, these factors are valid. But also, for some, these might simply be excuses to attempt to conceal the reality of changing demographics, increased competitors, current decrease in revenues, or an array of other factors. This is why it is really important that you not rely absolutely on a vendor's word, however rather, use the vendor's response together with your general due diligence. This will repaint a much more reasonable image of the business's existing situation.
Existing Debts and Future Obligations
If the existing business is in debt, which lots of companies are, then you will have reason to consider this when valuating/preparing your offer. Many companies take out loans with the purpose of covering points such as inventory, payroll, accounts payable, so on and so forth. Remember that in some cases this can indicate that earnings margins are too small. Many companies come under a revolving door of taking loans as a way to pay back other loans. In addition to debts, there may additionally be future commitments to consider. There might be an outstanding lease on equipment or the structure where the business resides. The business may have existing agreements with suppliers that have to be satisfied or may result in fines if terminated early.
Understanding the Customer Base, Competition and Area Demographics
How do businesses in the area bring in brand-new customers? Most times, companies have repeat clients, which create the core of their everyday profits. Certain variables such as new competition sprouting up around the area, roadway building and construction, as well as employee turnover can impact repeat clients and also adversely impact future profits. One vital point to consider is the area of the business. Is it in an extremely trafficked shopping mall, or is it hidden from the highway? Clearly, the more people that see the business on a regular basis, the greater the opportunity to build a returning client base. A last thought is the general location demographics. Is the business placed in a densely inhabited city, or is it situated on the edge of town? Exactly how might the neighborhood typical family earnings effect future revenue prospects?