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BUYING A SMALL BUSINESS

On the Cutting Edge

Business for Sale: A Nashville-area glass and glazing company, priced at $8.2 million
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The majority owner of this architectural glass company started working from the back of his truck in 1990, with only $2,200 in cash. Three months later, he sold his prized possession--a big-screen TV--to pay the first month's rent on a warehouse. Today he has more than 40 employees, projected revenue of $10.7 million for 2007, and cash flow of more than $2 million.

One of the region's largest glazing businesses, the company installs windows and doors in new industrial and office buildings. It also handles interior tenant build-outs, fabricates windows and doors, and performs repairs. The company works with more than 20 area contractors, from which it draws significant repeat business. Gross margins increased eight points to 32 percent in 2006 as the owners wrung efficiencies out of the business by, for example, having suppliers deliver glass directly to job sites rather than to the company's warehouse.

Nationwide, many architectural glazing companies are solidly booked through 2008, says David Walker, an executive with the National Glass Association in McLean, Virginia--although he expects demand to slow down in 2009. With $9 million worth of signed contracts locked up for 2008, this company is well positioned to have another strong year.

The Asking Price: $8.2 million, which includes $300,000 in inventory. Assets include a forklift, specialized equipment, 16 trucks, and six cars. The 30,000-square-foot office and warehouse is available to lease. An adjacent two-acre parcel of land is for sale separately. The owners will finance up to half of the deal.

Price Rationale: At about three times 2007's projected EBITDA of $2.7 million, the price "isn't out of line" for a glazier with a $9 million backlog, says Robert Turner, who handles M&A work at Moore Stephens Apple, an accounting firm in Cleveland. But the promise of 35 percent margins should be carefully examined, he warns.

The Pros: Nashville is a good place to own a glass company. Between 1990 and 2005, the area's population grew by 39.1 percent to 1.6 million, according to the Nashville Area Chamber of Commerce. An expanding population should translate into more new building projects in the region.

The Cons: All construction businesses, including glass and glazing companies, depend on the health of the economy, and David Walker from the National Glass Association predicts a "hard landing" in 2009. Growth also is limited by the difficulty of finding qualified glass installers.

The Bottom Line: This is a solid business with potential for growth, especially for a buyer with experience in the construction industry. Success depends on quoting prices that accurately reflect costs; good service; and, in the future, sufficient cash flow to ride out periodic lulls in the building market.

Company Financials 2005 2006 2007 (projected)
Gross Revenue 6.1 million $9.5 million $10.7 million
EBITDA* $575,485 $2 million $2.7 million
Gross margin 24% 32% 35%

*Earnings before interest, taxes, depreciation, and amortization.

Inc. has no stake in the sale of the business featured. The magazine does not certify the accuracy of financial or other information provided by the seller. Inquiries should be directed to Mike Togneri of VR Mergers & Acquisitions at 770-881-7211 or mtogneri@vrsatlanta.com.

Last updated: Nov 1, 2007




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