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Niche Foundation Drilling Equipment- Rental & Service

A 10% down payment of $1,075,000 returns $1,005,645 in the first year after debt payments!

CASH FLOW
$2,448,442

Specifications

  • Price
    $10,750,000

  • Revenue
    $17,809,946

  • Cash Flow
    $2,448,442

  • Profit Margin
    14%

  • Location
    Salt Lake City, UT with a satellite location in Phoenix, AZ

  • Service Area
    US and Canada (95%); Europe, South America, Australia (5%)

  • Equipment
    $3,401,000

  • Inventory
    $665,000

  • Account Receivable
    $750,000

  • Lease
    Location 1: 2,400 sq. ft.: 5 offices, 7 acre fenced yard; Location 2: 5 offices, conference room

  • Employees
    6: CFO, COO, operating consultant and mechanic, 2 sales, 1 accountant

  • Intangible Assets
    Long-term industry knowledge and experience, reliable industry professionals, sole distributorship

 

A 10% down payment of $1,075,000 returns $1,005,645 in the first year after debt payments! Assets include $4,815,000 in large heavy machinery, tools, safety equipment, and office equipment, and $665,000 in inventory of machinery and parts. They succeeded by placing focus on construction and foundation equipment sales and building their expertise in this field.  The professional team can help contractors, subcontractors, foundation companies, or other contracting businesses purchase or rent the equipment needed for their large infrastructure and construction projects.  This team of six offers ancillary services including consulting on equipment choice, training for use, as well as service and maintenance for current owners or renters, while the owners live out of state and oversee sales, consulting, and finances.  Their current backlog for 2020 is $4.25M.

With inventory on-hand for sales as well as rentals, all equipment is stored on a large, 7 acre fenced property in the Southwest US.  Included on the property is a 2,400 sq. ft. building that houses five offices for the administrative staff.  The second location has five offices, a conference room, and is utilized by administrative staff only.  The team consists of a CFO, COO, an operating consultant and mechanic, 2 salespeople, and an accountant.

To build revenue further, focused could be placed on expanding the rental inventory or offering long-term leases.  New focus could be placed on generating contracting work or expanding into casing manufacturing to diversify income streams.

Business Highlights

  • Year Established: 2007
  • Location:Salt Lake City, UT with a satellite location in Phoenix, AZ
  • Service Area:US and Canada (95%); Europe, South America, Australia (5%) 
  • Clients: General contractors, subcontractors, specialized contractors, foundation companies, electrical companies, waste management, infrastructure contractors, owners of large equipment
  • Products:  Specialty foundation drilling equipment, cranes, rotators, etc.
  • Services: Rental, sales, repairs, and maintenance of specialty heavy construction equipment
  • Lease: Location 1: 2,400 sq. ft.: 5 offices, 7 acre fenced yard; Location 2: 5 offices, conference room
  • Employees: 6: CFO, COO, operating consultant and mechanic, 2 sales, 1 accountant
  • Seller Training Period: 1 -2 years
  • Growth Opportunities: Increase rental inventory, expand into casing manufacturing, build contracting or subcontracting business, strategic marketing and lease equipment
  • Current Owners’ Responsibilities: Oversight of sales; negotiate large contracts (about 2-3/year. This is something a CEO could do, but the owner chooses to); sign off on loans and guarantors; lives out of state

Financial Highlights

  • List Price: $10,750,000
  • Gross Sales:
    • 2020: $17,809,946 annualized
    • 2019: $13,115,717
    • 2018: $11,619,572
    • 2017: $12,388,890
  • Cash Flow:
    • 2020: $2,448,442 annualized
    • TTM: $2,348,736
    • 2019: $1,534,805
    • 2018: $2,388,890
  • Assets
  • Fixed Assets: $3,401,000:  Large heavy machinery, tools, safety equipment, office equipment
  • Inventory:  $665,000        
  • Average A/R:  $750,000
  • 2020 Backlog: $4,250,000

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
July 2019 - June 2020
P&L Statement
Jan 1 - Jul 1 2020
P&L Statement
Jan-Dec 2019 Accrual
P&L Statement
Jan-July 2019
Tax ReturnTax ReturnNotes
TTM20202019201920182017
GROSS SALES$17,282,262$8,904,973$13,115,717$4,736,275$11,619,572$12,388,890
Annualized$17,809,946$9,472,550
Net Income Shown on Financial Statement$1,552,879$859,596$689,044$-56,854$244,163$716,717
ADDBACKS
Depreciation$739,617$342,880$787,914$391,177$1,789,170$933,455
Interest$24,915$10,208$31,060$16,650$32,370$31,595
Meals & Entertainment$23,495$8,619$23,925$9,050$23,602$14,030
Cell Phone$4,800$2,400$4,800$2,400$4,800$4,800$400/month
Transportation/Travel/Fuel$54,291$31,074$37,311$15,660$127,196$34,4355% Personal transportation, 25% personal and 60% personal in 2018 travel, 10% personal fuel
Amortization $0$0$0$0$52,683$53,956
Rent Adjustment $-54,370$-31,470$-42,358$-19,458$30,342$35,276$4,200/month onward going
Life Insurance$3,109$914$3,109$914$3,109$3,109
TOTAL ADDBACKS$795,857$364,625$845,761$416,393$2,063,272$1,110,656
Seller's Cash Flow = Total Addbacks + Net Income$2,348,736$1,224,221$1,534,805$359,539$2,307,435$1,827,373
Annualized
Profit Margin13.59 %13.75 %11.69 %7.59 %19.86 %14.75 %

!4% profit margin

Clients

  • Large general contractors
  • Subcontractors
  • Specialized contractors
  • Foundation companies
  • Electrical companies
  • Waste management
  • Infrastructure contractors
  • Owners of large equipment

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

Services

  • Rental
  • Sales
  • Consulting
  • Service and repairs
  • Maintenance of specialty heavy construction equipment

Employees

Total Employees: 6

  • CFO
  • COO
  • Operating consultant and mechanic
  • 2 Sales
  • 1 Accountant

Growth Opportunities

  • Increase rental inventory 
  • Expand into casing manufacturing 
  • Build contracting or subcontracting business 
  • Strategic marketing 
  • Increase international sales

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 multiple is prescribed 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 multiple.

For this business, a TTM cash flow was used with a prescribed multiple of 4.5.  With this information, the computation is as follows:

$2,348,736      x          4.5       =          $10,569,312

The fair market value found above positions the business list price at $10,750,000.

Funding Example

Purchase Price:                          $10,750,000

   10%Buyer Down Payment:       $1,075,000

   15%Seller Financing

            or Equity Roll:                     $1,612,500

   75%Bank Loan:                            $8,062,500

Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $89,510.

After business expenses and loan payments, a buyer with a 10% down payment of $1,075,000 would retain a profit of $1,005,645, which results in an 93% return on investment in the first year.

A lender is required to have a 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $10,750,000 with the terms listed above, the coverage ratio is 1.75. 

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 Business Brokerage 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:

$10,750,000

$
%
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
Omaha, NE 68114

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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.