What's your take on this deal?
Finalizing the LOI—would love to hear opinions and perspectives on different aspects of the deal.
Industry: Custom Cabinet Design, Manufacturing, and Installation Purchase Price: $1,950,000 (includes inventory of $266,866 and net working capital of $600,000) Annual Revenue: ~$3,800,000 SDE: ~$650,000 | EBITDA: ~$500K
Positives
• Proximity: 10 minutes from home. • Industry Fit: Strong personal interest in millwork and cabinetry. • Established Business: 20+ years in operation. • Experienced Team: Long-term employees expected to stay, including GM and Production Manager. Current owner works less than part-time (verified). • Diverse Client Base: Primarily established custom home builders with good diversification. • Strong Backlog & Cash Flow Management: Books 7-8 months in advance with a 50% deposit before production starts. • No Marketing Efforts: Consistently fills pipeline through existing network, leaving room for growth with a structured marketing strategy.
Potential Risks: • Real Estate Market Exposure: Business depends on home construction. However, with ~75 projects per year, I believe a more aggressive approach should maintain project flow even in a softer market. This is in a smaller city in Canada, and barring a full-on trade war or major disruption, the real estate outlook for this market doesn’t appear to be seriously doomed or anything. • Manufacturing Experience: My background isin finance, law, business development, and marketing—no hands-on manufacturing experience. • Family Involvement: Seller’s family is involved in the business and will continue (e.g., GM is the owner's older brother, and adult kids work in the factory).
Would appreciate opinions on the deal, especially from those who have researched or operate in this industry.
Finalizing the LOI—would love to hear opinions and perspectives on different aspects of the deal.
Industry: Custom Cabinet Design, Manufacturing, and Installation Purchase Price: $1,950,000 (includes inventory of $266,866 and net working capital of $600,000) Annual Revenue: ~$3,800,000 SDE: ~$650,000 | EBITDA: ~$500K
Positives
• Proximity: 10 minutes from home. • Industry Fit: Strong personal interest in millwork and cabinetry. • Established Business: 20+ years in operation. • Experienced Team: Long-term employees expected to stay, including GM and Production Manager. Current owner works less than part-time (verified). • Diverse Client Base: Primarily established custom home builders with good diversification. • Strong Backlog & Cash Flow Management: Books 7-8 months in advance with a 50% deposit before production starts. • No Marketing Efforts: Consistently fills pipeline through existing network, leaving room for growth with a structured marketing strategy.
Potential Risks: • Real Estate Market Exposure: Business depends on home construction. However, with ~75 projects per year, I believe a more aggressive approach should maintain project flow even in a softer market. This is in a smaller city in Canada, and barring a full-on trade war or major disruption, the real estate outlook for this market doesn’t appear to be seriously doomed or anything. • Manufacturing Experience: My background isin finance, law, business development, and marketing—no hands-on manufacturing experience. • Family Involvement: Seller’s family is involved in the business and will continue (e.g., GM is the owner's older brother, and adult kids work in the factory).
Would appreciate opinions on the deal, especially from those who have researched or operate in this industry.
Interesting deal—having looked at a similar business, a few things stand out: 1. Customer Concentration & AR Risk – As others mentioned, check if there’s any key dependency on a few homebuilders and how AR cycles play out. Even with deposits, slow-paying builders can strain cash flow. Dig deep into AR to ensure WC is enough.
2. Accounting Method – With a strong backlog, % completion accounting matters. If they recognize revenue on delivery vs. WIP, there might be hidden margin fluctuations.
3. Owner Transition & Family Dynamics – The GM being the owner’s brother is a double-edged sword. If he stays, great; if not, replacing him could be tricky given his informal leverage. Structuring the deal possibly with employment contracts, holdback, bonus for hitting targets, etc. Overall, price seems reasonable, but digging into these areas could help derisk the deal. Happy to discuss further!
Happy to connect virtually if you're interested.