Construction Industry Specialty Services
Patents eliminate any direct competition for this business
Orange County, CA
The business provides proprietary contract services for the movement of sand, gravel, and other materials in the construction, landscaping, and related industries. They also rent out hard-to-source in-demand conventional equipment for the same purpose. Their equipment and services are used to move materials at difficult construction sites for concrete slab base, abandonments, backfill, plumbing, and related applications, as well as for large landscaping projects. Currently the company operates primarily in southern California, but also in northern California, Nevada, and as far east as Texas. Its potential operating scope is nationwide. They are profitable and insulated from competition.
The company holds five U.S. Patents on its technology. These patents eliminate any direct competition and offer additional business opportunities for a new owner. Furthermore, current management has been continually improving designs, increasing efficiency, and reducing maintenance, wear, and operating costs.
Because the technology is patented, if anyone wants to accomplish the same tasks, they can only do so with less sophisticated, more costly, more labor-intensive, and more time-consuming processes. This gives the company an unassailable competitive edge.
The processes covered by the patents could be used throughout the world by licensing and/or by producing the equipment for sale to other operators.
The business employs four full-time employees, cross-trained in all the technology and processes.
The seller, with over 40 years experience in the construction industry, founded the business in 1997, and has owned and operated it since then with the goal of building it to support his retirement. Now in his late sixties, with the business running efficiently and profitably and with a steady growth trend, he has decided to offer the business for sale, provide for an orderly smooth transition, and pursue his well-earned retirement.
A successor would infuse the company with new energy, enhanced marketing exposure, and exploitation of the patented technology. The patents also have potential in other service and industrial applications.
Financial Summary: Sales for FY 2013 (Jan-Dec) were approximately $1,070,000, with a Seller’s Discretionary Earnings (“SDE”/adjusted cash flow) of approximately $274,000, making it a comfortably profitable business.
This company has a rather unique situation in its financial profile. Generally, the value of the assets of a company is found in the profits they generate. In the case of this business, however, the bulk of the assets are unique and proprietary. They could be sold for close to actual replacement value, even without the business operations. (See the “Value Proposition” section.)
Summary of 2013 Profit & Loss (000)
Direct Labor $213
Gross Profit $710
Operating Expenses $635
Net Operating Income $70.5
Owner Add-Backs (Salary, perks, interest, depreciation, etc.) $203.5
SDE / Adjusted Cash Flow $274
Because its unique nature makes this business easily identifiable, this offering is highly confidential. Complete historic financials will be made available to serious bona fide buyers only after a preliminary discussion with the broker and owner.
Facilities: The business stores rolling equipment in a leased outdoor yard and operates from a nearby leased office-warehouse suite. Both rental situations can be assumed by a new owner; but, the operations can easily be moved to a new facility.
The Transaction: The business operates out of two affiliated corporations. The deal structure will be a sale of all assets of both corporations (including all physical assets, patents and trademarks, good will, name, customer records, etc.,) excepting accounts receivable, accounts payable, and cash on hand. Inventory will be priced separately at cost. The business is priced at a reasonable* $1,495,000, plus inventory (typically ~$45k-$50k), subject to adjustment depending on deal structure, financing, and timing. Seller financing up to 20% of the sale price may be available. (*See the “Value Proposition,” below.)
The business is being offered publicly, as well as directly to major companies in the industry. It is an excellent acquisition target for (1) a contractor already in the industry, (2) a services provider already in the industry, (3) an individual with experience working in the industry, and (4) an investor who will hire operating management.
The Seller is very open to a substantial transition period in order to assure that the new owner is fully trained and that existing business is retained.
The value proposition is as follows:
Cost to replicate the three mobile proprietary rigs, conservatively $900,000
Cost to replace 40-odd material conveyors, conservatively $100,000
Cost to replicate the application and filing of patents, estimated $75,000
5 x SDE of $274,000 (20% ROI) $1,370,000
Total Value $2,445,000
Patents: This calculation does not include the intrinsic value of the patents, even though the patents are included in the sale. The patents represent additional potential that a purchaser can develop to generate incremental revenue and profit and, thus, enhanced value. The processes covered by the patents could be used throughout the world by licensing their use in the construction industry and/or by producing the equipment for sale to other operators. It is also possible that the patents could by used in other service and industrial applications.
Profit & Loss Statements, Monthly Sales Figures, and Furniture, Fixtures, & Equipment (“FF&E”) will be provided to serious bona fide buyers after a preliminary discussion with the broker and owner.
Note: All data on this business are provided by the Seller for information purposes only, and no representations are made by Broker as to accuracy. Broker has made no independent verification of the data contained herein. Buyer is advised to perform its own independent due diligence and seek the advice of professionals prior to purchasing the Business.