The biggest reason this business is still available is that the Seller has made the sale of the business contingent on the purchase of the real estate at the closing also. For the first time, he has agreed to allow the property to be leased. Since this a location driven business, the buyer of this type of business typically want to buy the property so the Seller will allow the buyer to have both a long term lease and exclusivity to buy the property for up to 2 years post closing.
The earnings makes this an inexpensive business but he has to sell based on his age, health, increasing amount of time spent in Alaska, etc. The business is being offered for the current value of all of the assets. The total current value of the vehicles and rental equipment is 2,324,523 which are the foundation of the total value of all of their assets of 2,708,128 which also includes furniture, office supplies/misc, small tools, parts, and other shop supplies. He will offer the company for below the current value of the assets at $2.65M. 2018 had revenues of 4.48M in revenues and 953K in earnings. 2019 had a slow start but only because he had the lowest level of rental assets he has ever had along with no floor plan because he didn’t want to invest in the business while it was for sale. Since it has not sold yet, he has recently decided to run it the way it needs to be so he has added over $1M in new assets based on the current demand. The purchases are attached and are mostly rental equipment along with a couple of spec pieces for sale to increase revenues and earnings again heading into 2020.
I made the Seller get rid of his floor plan for new dealership sales because a new buyer could not get a bank loan approved because the bank required that all revenue generating assets be available to a 1st position. This has meant that his dealership sales are down over the last 2 years. He just added a small amount of floor plan that can be gotten rid of if need be for financing. A new buyer will almost certainly increase the floor plan very soon after a closing to bring back their dealership sales. The other factor effecting their earnings is that the owner is retiring and has not been willing to add any rental equipment until recently. The demand is so high that he was forced to add around 700K worth of rental equipment to keep a couple of customers happy. The Seller knows this business needs more rental assets based on the current demand and has just purchased a lot but more can be bought on credit and will increase profits right away. He has told his employees this is for sale and a new buyer will have the ability to discuss this with his salesman who has been very vocal about this. In short, there are 3 reasons this company is not showing larger revenues and profits: the owner spends over 5 months during peak season in Alaska, he is undercapitalized in rental equipment, and his dealership sales dropped a lot after getting rid of his floorplan. A new buyer can fix all 3 quickly.
There is no better time to buy this company than right now. Banks will loan on this business and are requiring 20% down(not 10% unless they have direct experience already) and some additional working capital for well qualified buyers. Jeff
WESTERN CO MEDIUM/HEAVY EQUIPMENT COMPANY
2018 had revenues of 4.48M with normally adjusted earnings of 952K before any add backs for the seller spending 5 peak summer months in Alaska every year. 2019 is looking slightly below 2018 so he has added a lot of equipment in the summer and fall of 2019. 2020 should have a stronger and more profitable base than 2019 because of the current demand they are seeing with some additional capitalization from the Seller in the late summer/fall and what a new buyer could also add. Demand for the rental equipment is not an issue.
The current value of the assets are currently at 2.71M which is broken up by office supplies/misc, shop supplies, small rental equipment, parts, and vehicles/large rental equipment. He is offering the company for 2.65M. Keep in mind that Heavy Equipment rental companies are location driven and have one of the easiest to liquidate assets of all companies which is why they typically sell for 4 times their earnings or more. This is an inexpensive company selling for 3 times its earnings.
Many long-standing customers with big names along with hundreds of other long-term customers has resulted in a high percentage of recurring business. Plus, western Colorado has some of the largest Natural gas deposits in the country including one literally just a couple of miles from their location. Natural gas activity will most likely increase dramatically in western Colorado with new pipeline(s), democrats getting back into office whom prefer natural gas to coal, and prices firming up.
Equipment companies are typically “Fun” businesses to own.
The owner spends 19 weeks in Alaska mining gold during peak season every year. This negatively impacts the bottom line by at an estimated 250,000 dollars a year which means they should have made at least 1.15M last year. In fact, he takes 22 weeks off a year. A new owner will be able to grow this company by being there and focusing on growth.
Location: Western CO along the I70 corridor