Thank you to all who post, participate, and that have mentored me along the way. The support of from SF has been so helpful in this journey, and really helped me professionalize and accelerate my search.
My self-funded, no-investor search deal closed about a month ago. Details below for those who want the long story.
I am now looking for strategic partnerships in manufacturing, engineering, machining, defense. Let me know if you need parts machined, designed, or engineered! I am actively looking for opportunities to participate in onshoring or clean energy initiatives that need parts or contract manufacturing, assembly. Pumps, heat exchangers, defense systems are top interests. I've got an extra roughly 10,000 square feet (20,000 total including shop) prepped for manufacturing and 3+ rough graded acres for future expansion.
I'm still actively interested in deals relating to machine shops, engineering, technical products. Looking for "relocatable" deals in particular to bring to my location.
The Search, Deal
I submitted 4x IOI/LOIs for my personal search, and another 3x IOIs for deals related to my "day job". The one that worked was the last one. I brought LOI (not IOI) with me to lunch with broker and owner. I filled in the details and handed it to them before we left. After some minor negotiations, we were under LOI. I picked up the deal after a small "PE" firm dropped it. They didn't like the "rural" nature of the property.
My deal was 100% Seller Financed on business, but I had to buy the CRE. I liked the deal, and wanted my terms, so took seller's price which was reasonable. I bought at a 3.7x EBITDA multiplier, which was approximately the same as SDE in this case. This is in line with the BVR deal stats range on machine shops (which actually had some good stats for this niche vs some others that I had looked at), so was fine with me. There are some good and bad aspects to the business that I will not post here, nor will I post the name of Business, since this will be searchable. Find me on LinkedIn if you want to know more.
I was able to bring my current job and a newly formed research company that I use for Search, consulting, and government contracts. This gave me a ton of flexibility, synergy, immediate value add for my deal.
Navigating Banks Banks were a challenge for me. My top picks had underwriting issues with my deal. Not with cash flow or my personal finances, just one, specific aspect of customer concentration. This was an issue for these banks, even though I was only asking for a CRE loan fully backed by collateral of the real estate, yes with my personal guarantee too.
So, I went with a local bank and the Broker recommended approaching it as an "investment" property not owner operated. We were trying to rush to get deal done conventionally without SBA. I do not recommend this approach and it ultimately flamed out when the local bank asked me last minute for 25% down vs 20% as was agreed, 15 yr vs 20yr amo, AND a personal guarantee from the Seller of the property. They would not allow a corporate guarantee from lessee of the rent, they wanted it from Seller for full amount. So, I had to walk from this bank and this almost killed my deal because it I could no longer close before EOY which I was important to Seller for tax reasons.
Now, I pivoted to 6x more banks. I went to two banks recommended by broker and ultimately closed with CapStar bank, a local option in TN. I went to bank that business had been using. They couldn't do it. I then got a quick yes from broker's other bank recommendation, but it would have been costly at 25% down...I would have had to refi immediately to SBA. I ended up getting 15% down conventional, at pretty agreeable terms. Property purchase for and appraised for an 8% cap, which was below replacement value from my calculation.
The shop is older, no website, but does well on one shift with five employees. This is a total value add to me, which was OK since profit was already there.
Operations have been as expected. I have a lot of house cleaning and to do in the office and with old equipment. But I am comfortable with that. I have a great crew that needed new leadership and vision. They embraced me immediately and were telling me about many changes that they wanted (that I could already see needed to happen). The "nothing will change" was soon, "here is your Direct Deposit form". One employee confided he was so happy to not have to drive an extra 30 minutes to the bank every week (weekly payroll). I switched to QBO from Desktop on Day 1. Website soon. I was sending quotes and invoices on Day 1, immediately stepping up in the short staffed office.
What's next? Growing the shop, new equipment. I've been in sales and operations for 7 years. Now I get to do what I know best.