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Fabricator & Manufacturer for Emission Control Components

Over $1.25M in assets – bank loan is nearly collateralized!

CASH FLOW
$638,355

Specifications

  • Price
    $2,550,000

  • Revenue
    $3,054,449

  • Cash Flow
    $638,355

  • Equipment
    $356,415

  • Location
    Ontario, CA & Washington, US

  • Service Area
    Canada, US, & Global

  • Profit Margin
    23%

  • Multiplier
    4.00

  • Valuation
    $2,553,420

With over $1.25M in assets, the bank loan is nearly collateralized! This component manufacturer has clients that include distributors and government entities! Clients include distributors and government entities. Operating out of a 15,000 square foot state-of-the-art facility, this company manufactures and fabricates emission control devices for vehicles, heavy equipment, and power generators.  The business uses state-of-the-art equipment and techniques to fabricate components that are used in both new equipment as well as retrofits. Equipment includes CNC Machines, Laser & Plasma Cutters, welding equipment, mechanical tools, hand tools. The business also operates a satellite operation in Washington state, through a US subsidiary. This subsidiary generates significant business and allows the business to perform jobs for government entities who prefer to deal with American businesses. This business has a 23% profit margin! The owner is willing to stay on up to one year and is in the process of planning for retirement.

 

The fabricated components are sold to clients all over Canada, the United States, and worldwide, and 75% of sales are made to repeat customers. There are significant growth opportunities in the US market.   Their clientele consists of distributors, government entities, public institutions, and commercial customers. Sales are made 20% directly to customers and 80% through distributors, with most distributors located in the United States. Personnel includes 13 W-2 employees and 4 independent contractors.  

 

This business has a great reputation and consistently gains customers by word of mouth! Growth opportunity would include hiring a dedicated salesperson, marketing, and direct sales to the OEM.


Business Highlights

  • Year Established:  2016
  • Location: Ontario, CA & Washington, US
  • Service Area: Canada, US, and Global
  • Clients: Distributors, Government Entities
  • Services: Fabricating finished emission control components
  • Building: Shop and office space
  • Reason for Selling: Retirement planning
  • Personnel: 13 Employees, 4 Contractors
  • Seller Training Period: 1 year
  • Growth Opportunities: Hiring salesperson, increasing marketing, and expanding US sales
  • Current Owner’s Responsibilities: Daily management, HR

Financial Highlights

List Price: $2,550,000 CAD

  • Gross Sales:
    • 2020: $3,054,449
    • 2019: $4,882,999
    • 2018: $3,568,334
    • 2017: $2,573,455
  • Cash Flow:
    • TTM Cash Flow: $638,355
    • 3-year average: $724,177
  • Assets Included in Purchase*
    • Equipment: $356,415: CNC Machines, Laser & Plasma Cutters, welding equipment, mechanical tools, hand tools
    • Vehicles: $87,060: 3 pick-up trucks, 2 trailers (12 ft. & 27 ft.)
    • A/R: $335,490
    • Inventory: $474,695

*amounts may vary, assets may be depreciated, replacement cost, or fair market value 

Cash Flow Analysis

Description of Financial StatementP&L Statement
March 2019-February 2020
P&L Statement
May 2019-April 2020
P&L Statement
March 2018-February 2019
P&L Statement
March 2017-February 2018
P&L Statement
March 2016-February 2017
Notes
20202020201920182017
GROSS SALES$3,054,449$2,836,915$4,882,999$3,568,334$2,573,160
Net Income Shown on Financial Statement$505,499$403,333$831,364$700,543$573,160
ADDBACKS
Compensation to Owner$0$185,000$100,000$200,000$200,000
Amortization$78,448$78,488$84,535$68,946$23,111
Auto Expense$25,286$25,219$22,660$12,398$13,57590% is personal
Meals & Entertainment$7,029$6,279$5,770$5,855$7,57780% is personal
Telephone$5,843$6,620$7,513$5,687$2,04375% is personal
Travel$2,228$0$3,000$0$0One-time Cost
Tools/Work Shop Supplies$8,000$8,000$8,000$8,000$8,000Personal Expense
Replacement$-85,000$-85,000$-85,000$-85,000$-85,000To replace GM position
Consulting$9,000$10,416$0$0$0
TOTAL ADDBACKS$50,834$235,022$146,478$215,886$169,306
Seller's Cash Flow = Total Addbacks + Net Income$556,333$638,355$977,842$916,429$742,466
Profit Margin18.21 %22.50 %20.03 %25.68 %28.85 %
Profit Margin: 23%

Clients

  • Distributors
  • Government Entities
  • Public Institutions
  • Commercial Customers

Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.

Services

  • Manufacturing of Emission Control Devices
  • Catalyst and DPF Canning
  • Fabrication Shop (set up for custom work)
  • Metal Spinning and Laser Cutting

Personnel

  • 13 Regular Employees
    • 1 Shop Manager
    • 1 Office Manager
    • 1 Buyer
    • 1 Customer Service
    • 1 Quality Control
    • 1 Shipping & Receiving
    • 7 Shop Workers (machinists and welders)
  • 3 Part-Time Independent Contractors
    • 1 IT Tech
    • 1 Bookkeeper
    • 1 Accountant
  • 1 Full-Time Independent Contractor
    • Sales/Service Representative for Washington region

Growth Opportunities

  • Hire dedicated outside salesperson
  • Increase marketing
  • Expand Operation in Washington

Valuation Details

 

The Firm used a cash flow valuation methodology to determine the purchase price of the business. 

The formula used is as follows:

Cash Flow       x          Prescribed Multiple     =          Fair Market Value

Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.

A prescribed multiple is determined by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiplier.

For this business, a TTM cash flow was used with a prescribed multiple of 4.  With this information, the computation is as follows:

$638,355         x          4       =          $2,553,420

The fair market value found above positions the business list price at $2,550,000 CAD

 

Funding Example

Purchase Price:                $2,550,000 CAD

17% Buyer Down Payment:     $433,500

17% Seller Financing:               $433,500

66% Bank Loan:                     $1,683,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $8,082.

Bank loan 6-year term at a rate of 6% equals a monthly loan payment of $27,892.

A lender is required to have a minimum 1.3 coverage ratio for any business loans extended. At a proposed purchase price of $2,550,000 with the terms listed above, the coverage ratio is 1.48.

Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available. 

*The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.

Purchase Price:

$2,550,000

$
%
OR
$
%
OR
$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
TTM cash flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
TTM cash flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

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210 N 78th St. 2nd Floor
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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.