Business for Sale: West Coast Manufacturer of Laminated Boards

THE BUSINESS How's this for the ultimate revenge of a cubicle dweller? Purchase a cubicle manufacturer instead--or, in this case, a 10-year-old company that manufactures high-pressure laminated particleboard used to make modular-office products. With a reputation for quick turnaround, high quality, and customer service, the company has strong ties to 100 or so mostly regional furniture manufacturers. The company's two midsize facilities are leased, but the deal includes about $1 million worth of inventory. The founders are ready for new challenges, but their 26-person staff, including plant managers, should stay on for the next shift.

PRICE $3.4 million (terms negotiable)

OUTLOOK Currently operating at roughly 30% of its production capacity, this company looks more like a gold mine than a plastics-and-formica facility. That's because the founders have relied on word-of-mouth recommendations to generate orders. Given the vibrancy of the company's customer niches, a new owner could bust out of this cubicle simply by hiring a sales team.

PRICE RATIONALE This deal is tougher to cut than a laminated board. That's because smallish manufacturers tend to sell for about 45% of gross revenues (here, around $1.2 million) or a multiple of 1.25 to 1.75 times recast earnings ($653,000 to $915,000). But both valuation methods seem off track, since this company is operating way below capacity and has a reputation that could sustain much higher revenues. So it makes sense to price the company as if it were bigger: maybe in the $10-million-to- $20-million range, where deals typically close around 5.1 times recast earnings (or, for this company, $2.7 million).

PROS All those 1,600-gallon jugs of glue just sitting there begging for faster growth. Who could resist?

CONS This isn't the sexiest business around. And if you start behaving as though it is, will you alienate all those old-time customers? -- Jill Andresky Fraser

Financials 1995** 1996** 1997**
Gross Revenues $1,600,000 $2,141,000 $2,654,000
Recast Earnings* $304,100 $406,790 $522,752

*Before depreciation, interest, taxes, and owner's compensation
**Fiscal year

Inc. has no stake in the sale of the business featured.

The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Gene Christensen, GLH & Associates Inc., at 714-752-9700.