Fabricator & Manufacturer for Emission Control Components
Over $1.25M in assets – bank loan is nearly collateralized!
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.
- 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
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
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
March 2019-February 2020
May 2019-April 2020
March 2018-February 2019
March 2017-February 2018
March 2016-February 2017
|Net Income Shown on Financial Statement||$505,499||$403,333||$831,364||$700,543||$573,160|
|Compensation to Owner||$0||$185,000||$100,000||$200,000||$200,000|
|Auto Expense||$25,286||$25,219||$22,660||$12,398||$13,575||90% is personal|
|Meals & Entertainment||$7,029||$6,279||$5,770||$5,855||$7,577||80% is personal|
|Telephone||$5,843||$6,620||$7,513||$5,687||$2,043||75% is personal|
|Tools/Work Shop Supplies||$8,000||$8,000||$8,000||$8,000||$8,000||Personal Expense|
|Replacement||$-85,000||$-85,000||$-85,000||$-85,000||$-85,000||To replace GM position|
|Seller's Cash Flow = Total Addbacks + Net Income||$556,333||$638,355||$977,842||$916,429||$742,466|
|Profit Margin||18.21 %||22.50 %||20.03 %||25.68 %||28.85 %|
- Government Entities
- Public Institutions
- Commercial Customers
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Manufacturing of Emission Control Devices
- Catalyst and DPF Canning
- Fabrication Shop (set up for custom work)
- Metal Spinning and Laser Cutting
- 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
- Hire dedicated outside salesperson
- Increase marketing
- Expand Operation in Washington
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
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.
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: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
TTM cash flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
TTM cash flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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