This Week In SMB PE | August 6th, 2024

A Weekly Recap of SMB Deal + Opportunities

Author

Dennis Unrein
August 06, 2024

Welcome to This Week In SMB PE. Our weekly recap of deals in the SMB M&A and Micro Private equity 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.

This Week In SMB PE

**Disclosure: SMB PE helping represent The Seller in this deal

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Prior Posts:

SMB PE 101 Paid 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 and locate potential SMBs for purchase. For those interested we launched a community to advice and help SMB Searchers.

Our digital products will be designed to help you speed up your process and save potential costs where possible as buying a business can be a long road.

Below are some resources that we provide to Searchers in the space:

1) Free Resources From SMB PE:

2) Paid M&A Community Hosted on Skool

  1. SMB PE Accelerator via Skool ($99 / Month)

    • Content: Growing Library of content around Micro Private Equity + Small Business M&A

      • How to Find A Company (Websites, Brokers, Off-Market Deals)

      • Timeline for example deals and potential timelines

      • Valuation and financial model for Pre-LOI analysis

    • M&A 20-Minute Consulting Calls (trial): We have added 15x phone call slots a week via Calendly for members to book time to speak. Topics include deal structuring, financing and questions around recommended legal and service providers.

    • Exclusive Off-Market Deals: Where possible, we will try and share compelling deals with our subscribers ahead of posting publicly. Subscribers will receive access to our deal pipeline as we expand.

    • Databases: We have pulled together helpful databases for searchers to get started. They are also available for one-time purchase. Skool members receive all databases to-date and going forward as a part of their participation in the community:

    • Investment Accelerator (Option): Separately, option for our investor group to participate compelling deals if they choose to. We have 125+ accredited investors that can invest at their discretion.

We are designing the Skool to provide M&A Advisory to individuals looking at buying companies and how to buy a company.

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

3) Allergic to subscriptions? SMB PE resources on-time purchase below:

  • 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.

Interested In A Deal? Expanded information included below:

1. NYC Commercial Cleaning - New York - $5.1M Revenue | $1.0M Cashflow

Deal Summary:

  • $5.1M Revenue

  • $4.3M Ask Price

  • 4.3x Multiple

  • $1.0M Annual Cash Flow

What does the Company do?

  1. Commercial Cleaning + Janitorial Services.

  2. Clients in New York City + Nassau County.

  3. Commercial, Office, Specialty Customers.

Highlights:

  1. Recurring revenue contracts.

  2. Established business, 35+ Years Old.

  3. Longtime, loyal staff in place.

Risks/ Concerns:

  1. Customer concentration risk.

  2. Employee turnover rates post-close.

  3. Licenses/ insurance for operational risk.

2. Licensed Cannabis Dispensary - New Hampshire - $2.2M Revenue | $720K Cashflow

Deal Summary:

  • $2.2M Revenue

  • $1.3M Ask Price

  • 2.2x Multiple

  • $720K Cashflow

What Do They Do?

1.Vertically integrated dispensary
2. Dispensary, cultivation + manufacturing
3. State-Licensed in New Mexico

Highlights

1. On pace to generate $700K+ in cash
2. Range of high-margin products
3. Consumer demand has 3x’d in 5 years

Risks/ Concerns:

1. Opened in 2022, why sell?
2. Security + surveillance systems
3. Banking issues given federal regs

3. Adult Day Care Facility - New Jersey - $5.8M Revenue | $1.5M Cashflow

Deal Summary:

  • $5.8M Revenue

  • $6.0M Ask Price

  • 4.0x Multiple

  • $1.5M Cashflow

What Do They Do?

1. Day care services for seniors
2. Health + medication management
3. Social engagement programs

Highlights:

1. Growing elderly population
2. Increasing demand senior care
3. Highly profitable

Risks/ Concerns:

1. Only open for 5 years, why sell?
2. Liability risks related to elder care
3. Integration issues w/ operations

4. Fuel Delivery & Service - New Hampshire - N/A Revenue | $443K Cashflow

Deal Summary:

  • $985K Ask Price

  • 2.2x Multiple

  • $443K Annual Cash Flow

What does the Company do?

  1. Residential heating oil delivery.

  2. Service + maintenance contracts.

  3. Propane tank installation + refill.

Highlights:

  1. Decades old brand name in North N.

  2. Recession-resistant essential service.

  3. High barriers to entry (regulations).

Risks/ Concerns:

  1. Customer churn post-acquisition.

  2. Hidden environmental liabilities.

  3. Outdated or poorly maintained fleet.

5. IT & Managed Service - Nevada - $2.2M Revenue | $636K Cashflow

Deal Summary:

  • Ask Price OTO (Open-to-Offer)

  • $2.2M Revenue

  • $636K Annual Cash Flow

What does the Company do?

  1. Managed IT Services.

  2. Monthly Support Contract Revenue.

  3. Established in 2002, 20+ year history.

Highlights:

  1. 70%+ Recurring Revenue Model.

  2. 20+ Years In Business, Profitable.

  3. Sticky customer base w/ contracts.

Risks/ Concerns:

  1. Certification Requirements IT.

  2. Client Churn Post-Transition.

  3. Team and Talent Retention.

6. CPA Firm - Nebraska - $1.7M Revenue | $850K Cashflow

Deal Summary:

  • $1.3M Ask Price

  • $1.7M Revenue

  • 1.5x Multiple

  • $850K Annual Cash Flow

What does the Company do?

  1. Individual and business tax advice.

  2. Services include tax preparation, bookkeeping and tax planning.

  3. Various industries healthcare, construction, manufacturing, RE.

  4. Team of 6 people that pride themselves on quality work.

  5. Founded in the 1940's, long history of profitability + retiring Partners.

Highlights:

  1. High-margin business as professional services, attractive multiple.

  2. Diversified revenue stream of customers.

  3. Long history of operating profit, partners are retiring.

Risks/ Concerns:

  1. Partner-Dependency Risk: How will partners leaving impact business?

  2. Revenue Split: What % is individual vs business? One-time vs recurring?

  3. CPA License: Required to run these types of businesses - someone there to potentially promote?

7. Auto Repair & Service Shop - $1.3M Revenue | $300K Cashflow

Note: SMB PE LLC may receive affiliation fees on sale as we co-represent the underlying deal. This is our first deal on BizBuySell.

Deal Summary:

  • $1.2M Ask Price

  • $1.3M Revenue

  • 4.0x Multiple

  • $300K Annual Cash Flow

What does the Company do?

  1. Family owned business with 60+ years of operating history

  2. General service, electrical diagnostics, inspections, transmissions

  3. Revenue 30-40% routine services and 60-70% high-margin jobs

  4. Excellent staff in place and loyal, repeat customer base

  5. Strategically positioned in high-visibility area Northeast Florida

Highlights:

  1. Long time history of profitability, Owner retiring

  2. High-end auto with Average Repair Order (ARO) 30%+ vs market

  3. Little to no professional marketing completed to-date, word of mouth

Risks/ Concerns:

  1. Owner-Dependency: How will Owner leaving impact business

  2. Team has great people in place to help with transition, any at risk?

  3. Owner owns underlying Real Estate, have to negotiate terms

8. Souvenir Gift Shop Manufacturer - Montana - $2.9M Revenue | $706K Cashflow

Deal Summary:

  • $2.8M Ask Price

  • $2.9M Revenue

  • 4.0x Multiple

  • $706K Annual Cash Flow

What does the Company do?

  1. Manufacture merchandise t-shirts, mugs, keychains, magnet.

  2. Customers are souvenir shops, gift stores, airports and truck stops.

  3. Laser engraving machines to customize branded merchandise.

  4. In addition, have several finished products for quick shipping.

  5. Established business with 33 years of operating history.

Highlights:

  1. Diversified customer base with shops in all 50 states.

  2. Recurring contracts with key tourist venues for branded merch.

  3. Established business with 30+ years of operating history.

Risks/ Concerns:

  1. Seasonality: How much of the revenue is for seasonal items?

  2. Labor/ Team: Any key employees or hires expected to leave.

  3. Owner-Dependency Risk: How will Owner leaving impact business?

9. Commercial Electrical Contractor - Missouri - $1.9M Revenue | $900K Cashflow

Deal Summary:

  • $4.0M Ask Price

  • $6.4M Revenue

  • 2.1x Multiple

  • $1.9M Annual Cash Flow

What does the Company do?

  1. Established Commercial Electrical Contractor 20+ years in business.

  2. Installation & maintenance of facilities for commercial customers.

  3. Commercial electrical installations for new construction projects.

  4. Electrical systems renovations for existing buildings.

  5. Operates out of Leased stand-alone facility located in industrial area.

Highlights:

  1. Established Business: 20+ year operating history and retiring Owner.

  2. Diverse Revenue & Existing Customers: Immediate revenue day 1.

  3. Recession Resistant: Electrical contracting resilient in downturn.

Risks/ Concerns:

  1. Owner-Dependency Risk: How will Owner selling impact business?

  2. Labor/ Team: Business has 40 people working there, any leaving?

  3. Customer Concentration: What % of revenue is from top customers?

10. Gas Station - Mississippi - $6.3M Revenue | $900K Cashflow

Deal Summary:

  • $5.0M Ask Price

  • $6.3M Revenue

  • 5.6x Multiple

  • $900K Annual Cash Flow

What does the Company do?

  1. Fuel Sales: Gasoline and diesel fuel are primary revenue drivers.

  2. Convenience Store Items: Snacks, beverages, and tobacco products.

  3. Automotive Products: Motor Oil, Windshield Washer Fluid, other.

  4. Additional income Merchandise, Fast Food, Billboard Rental, ATM.

  5. Real estate estimated at $2.3M included in purchase price.

Highlights:

  1. Top locations develop strong cash flow and consistent revenue.

  2. Diversified Revenue streams across fuel, food services, car products.

  3. Scalability: Potential to replicate across several locations.

Risks/ Concerns:

  1. Real Estate: When was the last time there was an appraisal?

  2. Established in 2020, new build why are they selling?

  3. Fuel Supply Agreement: What are the terms and pricing?

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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