SMB PE | Deals Of The Week

We target cash-flow positive companies under $10M in deal value.

Author

Dennis Unrein
March 29, 2024

Welcome to SMB PE Deals Of The Week.

We source and highlight cash-flowing companies under $10MM in acquisition value.

In this newsletter we post our interesting opportunities in SMB M&A and Micro Private Equity.

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Prior Posts:

SMB PE Deals Of The Week

  1. Fence Installation

  2. Machinery & Replacement Manufacturer

  3. Credit Card Settlement

Disclaimer: This is not investment advice. Please do your own research (DYOR) and consult your professional tax advisor and legal advisor before making a decision. Any examples used in this material are generic, hypothetical and for illustration purposes. We list below at Seller’s Ask Price to be consistent with online listings.

1. Fence Installation

Seller: $5.9M Ask Price | 4.4x Multiple | $1.3M Annual Cash Flow

What does the Company do?

  • Fencing installation companies offer a wide variety of fencing solutions to both residential and commercial clients including aluminum, chain-link, PVC and wood fencing

  • Residential fencing is designed for privacy, security, or aesthetic enhancements and is available in materials like wood, vinyl, aluminum and composite

  • Commercial fencing is for more robust solutions for businesses and institutions, focusing on security and durability, including chain-link, steel and automated gate systems

  • Maintenance and repair services offer clients post-installation help with wear and tear, damage and upgrading of existing installations

Why Now?

  • There has been a resurgence in construction and home improvement post-pandemic for residential home projects

  • Generally fencing installation companies are popular in SMB acquisition universe and rare to find deals of this size with $1.3MM in estimated cash flow

Why Not?

  • Have to check on the blend between residential % and commercial % for customers

  • Commercial customers tend to be stickier, longer term contracts with more technical work

What are is estimated structure of the deal at ask price?

  • $5.9M Ask Price

  • 4.4x Annual Cash Flow

  • $1.3M Annual Cash Flow Before Deal (SDE)

  • $569K Annual Cashflow (SDE), After Following Deal With Debt

  • $295K Minimum Down Payment Assuming Max SBA Leverage %

Deal Of The Day Article: 

2. Machinery & Replacement Manufacturer

Seller: $5M Ask Price | 5.3x Multiple | $940K Annual Cash Flow

Note: Ask price includes estimated $2.5M of Real Estate

What does the Company do?

  • Machinery & Replacement Manufacturers specialize in the design, production and sale of industrial machinery and equipment

  • Companies in the space operate across various sectors including manufacturing, construction, agriculture and mining

  • This manufacturer focuses specifically on bag machines, carpet manufacturing equipment and textile products

Why Now?

  • This is an established business with 50+ years in operation

  • The owner is now into his 80’s and is ready to retire and no succession plan in place

  • Manufacturing can be solid, recession resilient business

Why Not?

  • Have to make a determination on underlying equipment and recent capex spend %

  • Often times high capex businesses fail to maintain re-investment into equipment as they age and exit

What are is estimated structure of the deal at ask price?

  • $5.0M Ask Price

  • Includes $2.5MM in Real Estate

  • 5.3x Annual Cash Flow

  • $948K Annual Cash Flow Before Deal (SDE)

  • $418K Annual Cashflow (SDE), After Following Deal With Debt

  • $250K Minimum Down Payment Assuming Max SBA Leverage %

Deal Of The Day Article: 

3. Credit Card Settlement Company

Seller: $1.6M Ask Price | 3.7x Multiple | $433K Annual Cash Flow

What does the Company do?

  • The business negotiates on behalf of consumers to reduce the overall debt owed with creditors

  • Established business for 15+ years that developed current model during the wake of the financial crisis in 2009

  • Today's owner has 800+ active clients in the system with expected fees over the next 4 years of $2.25M Revenue and generating $1.1M in Cash Flow

Why now?

  • Total credit card debt in the U.S. at all all time-high via CNBC

  • Consumers are going to rely heavily on these services as more debt collectors figure out a way to navigate and collect owed payments

Why not?

  • Have to check through the current credit profile of lending book to better understand the guaranteed cash-flows over next few years

  • If customers are weak credit profile would lower price of the asset

What are is estimated structure of the deal at ask price?

  • $1.6M Ask Price

  • 3.7x Annual Cash Flow

  • $433K Annual Cash Flow Before Deal (SDE)

  • $195K Annual Cashflow (SDE), After Following Deal With Debt

  • $80K Minimum Down Payment Assuming Max SBA Leverage %

Deal Of The Day Article: 

Please reach out with any questions or recommendations for the newsletter. We will do our best to incorporate.

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