This Week In SMB PE | July 22nd, 2024

A Weekly Recap of SMB Deal + Opportunities

Author

Dennis Unrein
July 22, 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.

Agenda:

  1. Introduction

  2. Contact Us (Get In Touch - Google Registration Forms)

  3. Prior Posts (For prior weeks)

  4. SMB PE Resources (More information on SMB M&A)

  5. Deal Summary From This Week in SMB PE

This Week In SMB PE: Deal Summary

  1. HVAC + Sheet Metal - $613K Cashflow.

  2. Turf & Sod Company - $584K Cashflow

  3. Metal & Fiberglass Manufacturer - $975K Cashflow

  4. HVAC & Plumbing Company - $1.4M Cashflow

  5. Heavy-Duty Towing - $2.1M Cashflow

  6. Track & Field Company - $1.0M Cashflow

  7. Pool Service & Supply - $828K Cashflow

  8. Bonus: Government Compliance Schools & Libraries - Live SMB PE Deal Example - 30% IRR and 2.7X MOIC (Accredited Investors Only)

Contact Us: Google Registration Forms

If interested in working with SMB PE?

Free Google Forms below. Please introduce yourself:

Prior Posts:

SMB PE Resources

We receive inquiries about how to find SMBs for purchase. Below are digital products to help speed up your search process.

All-Inclusive Paid Community - $39 Month-to-Month Subscription:

  • Skool Monthly Subscription: Join our SMB PE community to access all materials launched to date. (Link)

  • Skool Preview: Click here for free overview of content available in Skool, lessons, databases and 15x time slots a week for group for calls (Link)

  • Month 1 Lesson/ Resource Examples:

    • “How To Find A Company” - on market + off-market

    • How to find the value of similar companies for valuation

    • Database: Database of 60+ marketplaces to Search

    • Broker database of 1,000 brokers by area and website to contact

    • 20 minute call spots for 1×1 calls weekly for members (trial)

One-Time Purchases - No Subscription Required:

  • 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.

This Week In SMB - Video Deal Reviews (Links Below)

  1. HVAC + Sheet Metal - $613K Cashflow

  2. Turf & Sod Company - $584K Cashflow

  3. Metal & Fiberglass Manufacturer - $975K Cashflow

  4. HVAC & Plumbing Company - $1.4M Cashflow

  5. Heavy-Duty Towing - $2.1M Cashflow

  6. Track & Field Company - $1.0M Cashflow

  7. Pool Service & Supply - $828K Cashflow

  8. Bonus: Government Compliance Schools & Libraries - Live SMB PE Deal Example - 30% IRR and 2.7X MOIC (Accredited Investors Only)

If interested in looking into these businesses, we have included more information below.

Disclaimer: Informational purposes only. None of This is not investment advice. Please do your own research (DYOR) and consult your professional tax advisor and legal advisor before making a decision. This is not professional tax advice or legal advice. Any examples used in this material are generic and hypothetical in nature. We list our deals at Seller’s Ask Price to be consistent with online listings and use publicly available information where we can.

1. HVAC + Sheet Metal - Hawaii - $613K Cashflow

Deal Summary:

  • $1.8M Ask Price (Incl. RE)

  • $2.9M Revenue

  • 2.1x Multiple (Ex-RE)

  • $613K Annual Cash Flow

What does the Company do?

  1. 25+ year HVAC and sheet metal fabrication business.

  2. HVAC: Heating, Ventilation and Air Conditioning services.

  3. Sheet Metal Fabrication: Cutting, bending and assembling.

  4. Scope of work Metal Fabrication (59%) + HVAC (41%).

  5. Customers are commercial, government and residential.

Highlights:

  1. Diverse customer base with strong backlog of future work projects.

  2. Established business since 1997, with strong reviews.

  3. Owner retiring after 25+ years running the business.

Risks/ Concerns:

  1. Owner wants sell including real estate - lease potential?

  2. Team of 9 non-union people - willing to stay on post close?

  3. Customer breakdown commercial / government / resident.

2. Turf & Sod Company - Idaho - $584K Cashflow

Deal Summary:

  • $1.95M Ask Price

  • $2.1M Revenue

  • 3.3x Multiple

  • $584K Annual Cash Flow

What does the Company do?

  1. 45+ year profitable turf business serving Pacific Northwest.

  2. Leading producer of water efficient turf grass sod.

  3. Sell Turf Grass, Grass Seed + Lawn Fertilizer to customers.

  4. Customers include Landscapers, Developers, Golf Courses.

  5. Best quality products and knowledgeable employees.

Highlights:

  1. Established in 1978, history of profitability + retiring Owner.

  2. Diverse customer segments in commercial + residential.

  3. Company relies solely on word of mouth referrals + website.

Risks/ Concerns:

  1. Inventory is listed at $1.1M - need a deep dive on NWC.

  2. Equipment and FF&E at $323K - any major capex needed?

  3. Labor & Team: What are the key members of the staff?

3. Metal & Fiberglass Manufacturer - Illinois - $975K Cashflow

Deal Summary:

  • $4.8M Ask Price

  • $5.1M Revenue

  • 4.9x Multiple

  • $975K Annual Cash Flow

What does the Company do?

  1. 35+ year old Industrial Manufacturing company.

  2. Works mainly with aluminum and fiberglass.

  3. Expertise on metal bending, welding and custom assembly.

  4. Customers - Wastewater, Mining, Commercial Construction.

  5. American made in 15,000+ square foot facility.

Highlights:

  1. Established in 1989, 35+ year history and Owner Retirement.

  2. Includes $1.25M Assets - $750K Equipment + $500K Inventory.

  3. Committed staff aware of ongoing sale, Owner travels.

Risks/ Concerns:

  1. Market Volatility: Wastewater, Mining and Construction cyclical.

  2. Machine/ Technology Capex: What Capex will be needed?

  3. Single-Facility: If facility goes down, business down.

4. HVAC & Plumbing Company - Indiana - $1.4M Cashflow

Deal Summary:

  • $3.8M Assumed Price Price (Assumed Price: Listed as Open-To-Offer or “N/A” on BizBuySell)

  • $4.4M Revenue

  • 2.7x Multiple

  • $1.4M Annual Cash Flow

What does the Company do?

  1. 45+ year profitable HVAC and Plumbing Company.

  2. Longstanding business with team of dedicated technicians.

  3. Techs trained in installation, replacements and maintenance.

  4. Service commercial, residential and new construction.

  5. Served 3,449 total customers 4 year trailing; 1,641 avg. annual.

Highlights:

  1. Established in 1978, 45+ years and retiring owner.

  2. Strong financial performance and 30%+ cashflow margins.

  3. Strong interest in HVAC from buyers for future M&A exit options.

Risks/ Concerns:

  1. Promotion Candidates: Anyone that can step in to help run ops?

  2. Customer Mix: What is breakdown % commercial vs residential.

  3. Product Mix: How much of the work is HVAC? Plumbing?

5. Heavy-Duty Towing - Iowa - $2.1M Cashflow

Deal Summary:

  • $8.4M Assumed Price Price (Assumed Price: Listed as Open-To-Offer or “N/A” on BizBuySell)

  • $6.9M Revenue

  • 4.0x Multiple

  • $2.1M Annual Cash Flow

What does the Company do?

  1. 30+ year profitable, family owned heavy-duty towing business.

  2. Multiple locations in Iowa for large towing + rollovers.

  3. Great reputation in towing, tire and auto repair.

  4. Offer roadside assistance services for blown tires + jump starts.

  5. Work w/ law enforcement and insurance to provide solutions.

Highlights:

  1. Established in 1993, 30+ year old business with retiring Owner.

  2. Great reputation in towing, repair and auto shop industry.

  3. Established relationships w/ local gov, police and insurance.

Risks/ Concerns:

  1. Is there a trusted General Manager to work with pose-close?

  2. Equipment: What is the state of the equipment/ life remaining.

  3. Product Mix: What is % towing Heavy? Lighter? What % Repair?

6. Track & Field Company - Kansas - $1.0M Cashflow

Deal Summary:

  • $5.1M Ask Price

  • $4.6M Revenue

  • 5.1x Multiple

  • $1.0M Annual Cash Flow

What does the Company do?

  1. 20+ year construction & design Running Tracks & Sports Fields.

  2. Specialize in High-Quality Track, Football + Soccer Fields.

  3. Niche industry w/ under 10 competitors in US w/ top standards.

  4. Utilize modern precision GPS and laser-guided equipment.

  5. Customers include High Schools, Colleges, Municipalities.

Highlights:

  1. Established in 2003, 21+ years in business retiring Owner.

  2. Over-booked, had to turn down $6M work last few years.

  3. Niche market within 3-state radius.

Risks/ Concerns:

  1. Project Based Revenue: What is project based vs recurring.

  2. Pipeline: What does next 2-3 year pipeline look like?

  3. General Manager: Anyone strong for GM/ President role?

7. Pool Service & Supply - Kentucky - $828K Cashflow

Deal Summary:

  • $1.6M Ask Price

  • $2.8M Revenue

  • 2.0x Multiple

  • $828K Annual Cash Flow

What does the Company do?

  1. Established business with 48+ years in operation.

  2. Pool Services: Maintenance + cleaning for 75+ customers.

  3. Pool Supplies: Supply products to commercial clients.

  4. Customers include commercial & residential clients.

  5. Well-trained, tenured staff of 6 with proven systems in place.

Highlights:

  1. Maintenance and recurring revenue on 75+ customers.

  2. Fragmented Market: Opportunities for consolidation.

  3. Established, 48+ years in business and retiring Owner.

Risks/ Concerns:

  1. Seasonality: Revenue fluctuations + cash flow stability.

  2. Labor: Talent retention challenges for skilled pool technicians.

  3. Competition: Market saturation and local competitors.

Bonus: Government Compliance Schools & Libraries - Live SMB PE Deal Example

Deal Summary:

  • Adj. EBITDA Multiple - 5.1x

  • Est. IRR Return - 30%

  • Est. MOIC - 2.7x

  • Total Equity Check - $1M+

  • Equity Spoken For - 50%

  • DSCR - 1.46x

What does the Company do?

  1. Top 3 nationwide regulatory compliance company.

  2. Specialize in programs for network + internet access.

  3. Customers are school districts and libraries.

  4. Help reduce school and library costs by up to 90%.

  5. Program not funded out of taxpayer dollars.

Highlights:

  1. Highly Recurring Contracts: 97% renewal/ retention rate.

  2. Low Customer Concentration: Top 5 less than 20%.

  3. Principal payback estimated at 3 years for LPs.

  4. Existing Leadership team to remain with company.

Risks/ Concerns:

  1. Rules/ Regulations: Ensure compliance with government.

  2. Hidden Liabilities: Any potential hidden liabilities?

  3. Competition: What is the competitive landscape?

  4. Political Climate: What chances are that policy changes.

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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