Sheet Metal Fabrication w/HVAC Design
A leader in crafting custom commercial heating and air conditioning solutions in the South Bay Area, the well-trained team of 39 can design, fabricate, and install systems that meet the needs of its customers. Working mainly on dry side HVAC projects and custom sheet metal fabrication, the business generated over $19MM in income in 2017 alone. General contractors are the largest client base and projects occur in schools and commercial properties such as restaurants and retail outlets. Utilizing state-of-the-art technology as well as over $400,000 in tools and equipment has allowed this company to remain highly regarded and on the cutting-edge of the field over the 27-year history.
The team of thirty-nine is composed of project managers, estimators, foremen, service technicians, and support staff. A member of SMACNA as well as local unions, all non-office staff are proud union members and the service area is strictly dictated by negotiated union territories. The current owner has financial oversight and acts as a superintendent as needed.
The building features 26,000 square feet of shop, office, and storage areas. In a highly desirable location, the space is available for continued lease with a new agreement aligned with area market rates.
- Year Established: 1991
- Location and Service Area: South Bay Area
- Clients: General contractors (80%), universities (10%), other direct work (10%)
- Projects are completed in: Hospitals, schools and universities, restaurants, commercial businesses
- Services: HVAC dry side (90%), sheet metal (10%)
- Building: 26,000 sq. ft.: Reception, 14 offices, shop, storage area, break room, training room, IT
- Reason for Selling: Exit strategy
- Employees: Project Managers (8), Estimating (2), General Foremen (5), Foremen (4), Shop (2), CADD (2), Service (5), Office (7), Other (4)
- Hours: General Hours 7:00-3:00 (Shop starts at 6:30)
- Seller Training Period: The owner is willing to stay on for 1-3 years.
- Growth Opportunities: Increase service team and contracts
- Current Owner’s Responsibilities: Oversight, as well as acting superintendent as needed
- List Price: $4,044,000
- Gross Sales:
- 2018: $20,071,717 Annualized
- 2017: $19,463,348
- 2016: $20,850,131
- 2015: $17,585,616
- Cash Flow:
- 2017: $1,522,349
- 2016: $807,289
- 2015: $336,807
- Assets Included in Purchase*
- Equipment: $847,000: Furniture, fixtures, tools, manufacturing equipment, etc.
- Vehicles: $604,000: Trucks, vans, trailers, cars
- A/R: ~$3,700,000 – Retention not included
- Inventory: $312,000
- Work in Progress: $13,300,000
- 2019 Secured Work: $14,900,000
- Intangible Assets: Long-standing positive reputation in the industry, experienced and well-trained team
*amounts may vary
Cash Flow Analysis
- 8% Profit margin in 2017
- Cash flow is down in 2018 due to an employee who has since been terminated
- After signing an NDA, we have ten years of financials and expenses going back to 1991 for a buyer to view. It should be noted that 2018 was an anomaly year where they were negative. There is already $14,000,000 in backlog secured at the beginning of 2019, setting up 2019 to be a very successful, if not the most successful year to date.
Typical Clients and Services
- General contractors (80%)
- Universities (10%)
- Other direct work (10%)
- HVAC dry side (90%)
- Unit changeouts
- Sterile and clean room qualified
- Quality control
- Laboratory design
- Energy management
- Indoor air quality management
- Project management
- Mechanical engineering
- FDA validation
- And much more!
- Sheet metal (10%)
- Commercial facilities
- Office buildings, high rises, restaurants, retail, banks, theaters
- Research facilities
- Laboratories, animal facilities, clean rooms
- Educational facilities
- Utility systems, labs, auditoriums, training centers, food service
- Healthcare related
- Hospitals, medical offices, clinics, bio-pharmaceutical manufacturers, surgical suites
- Industrial and manufacturing
- Electronics, site utilities, data centers, solar, manufacturing and assembly
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Total Employees: 39
- 3 Project Managers
- 2 Estimating
- 5 General Foremen
- 4 Foremen
- 7 Shop
- 2 CADD
- 5 Service
- 7 Office
- 4 Other
- Increase service team to increase capacity
- Market service contracts to customers
The Firm Business Brokerage 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 3-year average cash flow was used with a prescribed multiple is 4.5. With this information, the computation is as follows:
$898,815 x 4.5 = $4,044,667
The fair market value found above positions the business list price at $4,044,000.
Purchase Price: $4,044,000
15%Buyer Down Payment: $606,600
20%Seller Financing: $808,800
65%Bank Loan: $2,628,600
Seller financing 8-year term at a rate of 4.50% equals a monthly loan payment of $10,048.
Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $34,544.
After business expenses and loan payments, a buyer with a 15% down payment of $606,600 would retain a profit of $363,717, which results in a 60% return on investment in the first year.
A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $4,044,000 with the terms listed above, the coverage ratio is 1.68.
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.
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: $
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|Total Monthly Debt Service:||$|
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Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
3-Year Average Cash Flow
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Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
3-Year Average Cash Flow
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Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
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Omaha, NE 68114
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