This Week In SMB PE | November 5th, 2024

A Weekly Recap of SMB Deal + Opportunities

Author

Dennis Unrein
November 05, 2024

Welcome to This Week In SMB PE. Our weekly recap of deals in SMB M&A, Micro Private Equity and Self-Funded Search space.

In this newsletter we highlight interesting opportunities from this past week in SMB M&A, Micro Private Equity, and Search Funds.

We target cash-flowing companies under $10MM in acquisition value.

Podcast: SMB PE Expert Interviews

For those looking for a deep dive on the SMB space, we are interviewing experts in the field for those interested in learning more.

Highlighting two recent key interviews below:

  1. SMB SEO Services with Stryker Digital (Marketing)

  2. SMB M&A Accounting with Midwest CPA (Tax & Accounting)

1.SMB SEO Services with Stryker Digital

  • Discussion with Stryker Digital CEO Andy Walker

  • Stryker Digital specialized in SEO services for Home Services Businesses and SMB’s through local SEO search and paid advertisements

  • They offer services across digital ads, SEO as well as website creation and maintenance - all geared towards driving deal flow to Small Business Owners

  • Andy’s Co-Founder Bodhi Gallo bought and built a trash rental dumpster business selling it for 6x his entry price

2.SMB Accounting with Chris Barrett

  • Discussion with Midwest CPA Founder Chris Barrett

  • Chris’ firm specializes in SMB Buyout and ETA services - QofE and Bookkeeping

  • We talk through Quality of Earnings and what are the biggest flags his team runs into

  • We spend time on working capital and why it leads to so many failed deals

Contact Us: Google Registration Forms

If interested in working with SMB PE?

Free Google Forms below. Please introduce yourself:

Prior Posts:

Weekly Deal Reviews SMB PE | Video Reviews

Interested In A Deal? Expanded information included below:

1. 20+ YR Audio/ Visual + Security - Texas | $2.5M Revenue | $1.0M Cashflow

Deal Summary:

  • $2.5M Revenue

  • $1.0M Cashflow

  • $2.5M Ask Price

  • 1.0x Revenue Multiple

  • 2.5x Cashflow Multiple

What Do They Do?

  1. Systems integration business

  2. Specialize in audio/ visual + security systems

  3. Customers across healthcare, industrials and commercial

Highlights:

  1. Established in 2002, 20+ years operation

  2. Diverse client base, multiple industries

  3. Reputation as trusted partner

Risks/ Concerns:

  1. Dependence of key personnel post-close

  2. Competition from larger firms

  3. Modern technology changes in space

2. Halloween Store (Pop-Up) - Minnesota | $250K Revenue | Cashflow

Deal Summary:

  • $250K Revenue

  • $60K EBITDA

  • $125K Ask Price

  • 0.5x Revenue Multiple

  • 2.1X EBITDA Multiple

What does the Company do?

  1. Seasonal Halloween store (2-3x months only)

  2. Sells costumers, decor and accessories

  3. Operates w/ 1 month setup + 2 month sales

Highlights:

  1. 20+ years in business, Est. in 2004

  2. Established supplier relationships

  3. Short-term leases, lower retail overhead

Risks/ Concerns:

  1. Heavy reliance on seasonal staff hiring

  2. Inventory management

  3. Owner dependency risks

3. Excavation & Site Prep - New York | $2.7M Revenue | $1.0M Cashflow

Deal Summary:

  • $2.7M Revenue

  • $1.0M Cashflow

  • $3.8M Ask Price

  • 1.4x Revenue Multiple

  • 3.9x Cashflow Multiple

What does the Company do?

  1. Excavation and site prep services

  2. Commercial and public works sectors

  3. Earthwork, pipeline installation, roads, build prep

Highlights:

  1. 15+ years in operation, Seller retiring

  2. Diverse customers developers, contractors, municipalities

  3. Includes $1.25M in Equipment

Risks/ Concerns:

  1. Latest equipment fair market value

  2. Competition from local excavation

  3. Regulation & insurance costs

4. Mechanical Fuel Oil Systems - New York | $1.2M Revenue | $1.2M Cashflow

Deal Summary:

  • $1.2M Revenue

  • $1.2M Cashflow

  • $4.0M Ask Price

  • 3.3x Revenue Multiple

  • 3.3x Cashflow Multiple

What does the Company do?

  1. Installs and services mechanical fuel oil systems.

  2. Maintenance and inspections for commercial clients

  3. Markets in NYC

Highlights:

  1. Strong profit margins - 60%

  2. Average contract size 120k to 200k

  3. Average job duration 2 to 4 weeks.

Risks/ Concerns:

  1. Company only 4 years old. Why sell?

  2. Reliance on key personnel for operational continuity

  3. Regulatory changes in the fuel industry.

5. Profitable Automotive Repair Shop - Arkansas | $1.1M Revenue | $345K Cashflow

Deal Summary:

  • $1.1M Revenue

  • $345K Cashflow

  • $815K Ask Price

  • 0.7x Revenue Multiple

  • 2.4x Cashflow Multiple

What does the Company do?

  1. Repairs medium-duty + smaller fleet vehicles

  2. General repair, tire changes and maintenance

  3. Most of equipment recently updated

Highlights:

  1. Includes $255K equipment, 2-4 lifts w/ Jacks

  2. Prime location easy customer accessibility

  3. Preferred location for Autozone + Orielys

Risks/ Concerns:

  1. Breakdown of general repair vs. commercial

  2. Actual value of Equipment on site

  3. Team labor shortage + integration issues

6. 39-year HVAC & Plumbing Business - Ohio | $9.0M Revenue | $1.0M Cashflow

Deal Summary:

  • $9.0M Revenue

  • $1.0M Cashflow

  • $3.7M Ask Price

  • 0.4x Revenue Multiple

  • 3.7x Cashflow Multiple

What does the Company do?

  1. HVAC and plumbing services.

  2. Commercial and residential clients

  3. Core of several General Contractors

Highlights:

  1. Management team in place.

  2. Established customers and contractors

  3. Established in 1985, owner looking to retire

Risks/ Concerns:

  1. Labor shortages have hurt the business

  2. Looking for strategic leader/ existing company

  3. Large team to manage of 41

SMB PE 101 M&A Resources

Interested in learning more about Business Buying and if it is right for you?

We have received inquiries about resources to find, locate and underwrite potential SMBs potential acquisition targets. Beyond please options to follow along below.

1) Free Weekly Newsletter: 1x Weekly Deal Recap of SMB Deals

  • What Is It? Accelerator/ Incubator for Small Business M&A and Micro Private Equity deals

  • “How-To Buy A Business” Content Including: 

    • Process Timeline: Timeline for M&A deals

    • Models: Valuation and financial model for Pre-LOI analysis

    • Searching: Websites, Brokers, Off-Market Strategies

    • 1×1 Coaching Calls: 15 slots weekly for M&A Advisory Calls

    • Databases ($250 Value): Includes all SMB Databases below (60+ marketplaces, 111 Due Diligence Questions, 1,000+ Business Brokers)

  • Investors + SMB Accelerator (Optional): We have 125+ accredited investors that can invest at their discretion for live deals. We present them with interesting deals and they can choose to participate in deals if they choose to.

The average course is $2,000 in the market, so we priced our monthly community at $99 so that we can have something that is constantly adding over time. The average Search can take 12 - 24+ Months making us competitive with those in market for educational products.

  • SMB Marketplaces Database ($49): List of 60+ marketplaces + brokerages search for SMBs. (Link)

  • Due Diligence Volume I Database ($49): List of 111 questions to consider during due diligence. (Link)

  • Business Brokers Database ($149): List of 1,000+ business brokers to contact to increase deal flow. (Link)

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

SMB PE Disclaimer

For informational and illustrative purposes only. This communication does not constitute an offer to sell, a solicitation of an offer to buy or a recommendation of any security or any other product or service by SMB PE LLC. Prior to making any further decisions, investors should seek individual advice from their personal financial, tax, legal or other profession advisors to take into account the risks associated with their own specific situation.

While SMB PE LLC uses reasonable efforts to provide accurate and timely information, SMB PE LLC makes no representations or warranties as to the accuracy, reliability or completeness of any information included in this document. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purposes described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. Certain information contained in these documents may be superseded as new guidance or interpretations are issued and any contents or financial projections included are subject to change without notice. All materials are meant to be reviewed, including any footnotes, disclaimers, restrictions or disclosure, and any copyright proprietary notices. Access to information about investments is limited to investors who either qualify as accredited investors within the meaning of the Securities Act of 1933, as amended, or those investors who generally are sophisticated in financial matters, such that they are capable of evaluating the merits and risks of prospective investments.

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