Steel Fabrication Business (SOLD) - NEO Business Advisors
Case Study of Recent Transaction

Steel Fabrication Business

SOLD - NEO Business Advisors represented the seller of a long established Steel Fabrication and Stress Relief / Annealing business in Northeast Ohio near Youngstown. The business specializes in rolling, forming, bending and welding steel plate (including MIG, TIG, Sub Arc and traditional Stick welding).

Asking Price:  $765,000

Gross Revenue: $1,120,595

Cash Flow:  $168,556

FF&E: $350,000     Included?  Yes

Inventory:  $150,000     Included?  Yes

Real Estate:  $350,000     Included?  No

Building Size:  15,000 SF 

Employees:  12 Employees

Established: 1949

Location:  Ohio

Steel Fabrication Business for Sale Photo
Some Details of the Transaction Remain Confidential

Detailed Information

The business was underperforming due to recent health issues impacting the owner’s ability to run the day-to- day operations in 2018 and 2019. As the owner has recovered, 2020 is projected to be back on track with the company’s outstanding performance in 2016 and 2017. The trailing twelve-month (TTM) 2020 financials as of end of Q2 show Revenue of $1,225,758 with Seller’s Discretionary Earnings (SDE) of $211,489. The Projected (PROJ) 2020 financials based on Q1 and Q2 of 2020 show Revenue of $1,585,254 with SDE of $508,174 for over a 30% margin!

The business specializes in rolling, forming, bending and welding steel plate (including MIG, TIG, Sub Arc and traditional Stick welding). The business specializes in niche, skilled projects including large aggregate dryers, large ductwork assemblies and various structural steel projects. In addition to fabrication capabilities, the business also has two large annealing / stress relief furnaces.

Established over 70 years, the business has an excellent reputation with a long-standing customer base. The current owner purchased the business in 2009 after being an employee of the company for over 16 years.

Revenue by Year:

2020 Projected Revenue: $ 1,585,254

2020 TTM Revenue: $ 1,225,758

2019 Revenue $ 1,081,780

2018 Revenue $ 1,349,640

2017 Revenue $ 1,712,526

2016 Revenue $ 1,420,582

Seller’s Discretionary Earnings by Year:

2020 Projected SDE: $ 508,174

2020 TTM SDE: $ 211,489

2019 SDE $ 20,811

2018 SDE $ 40,369

2017 SDE $ 375,404

2016 SDE $ 288,452

Weighted Average SDE $ 234,103

2017 SDE (prior to health issues) $ 375,404

Prior to the owner’s health issues in 2018 and 2019 the business was consistently operating with margins greater than 20%. Even though efficiency decreased during the two most recent years with the owner taking time away from the business due to health issues, the business remained profitable at 5% and 9% margins for 2018 and 2019 respectively. The opportunity is here for a new owner to come in and quickly regain the revenue and margins seen in 2017 and grow from there.

Furniture, Fixtures, and Equipment (FF&E): FF&E of $400,000 are included in the asking price. The shop assets include welders (MIG, TIG, Sub-Arc and Stick), jib cranes in workstations, two annealing/stress relief furnaces, plate rolling equipment, a 325-ton Press Brake, drilling, sandblasting, and painting equipment. The office assets include desks, chairs, computers and licenses and/or subscriptions for engineering/design software.

Inventory: Inventory and work in process of $150,000 are also included in the asking price to be adjusted up or down at time of sale based on actual Inventory and WIP level at that time. Inventory is minimal and includes miscellaneous flat plate and angle stock that can be used on jobs or in fixturing. Most material is purchased for specific jobs and thus WIP includes material on the floor that has been bought and paid for along with labor, at cost, in the job at the time of transfer that has not yet been billed to a customer.

Real Estate:  Real Estate is owned by the seller to be sold with the business for $350,000 (not included in asking price) that includes two buildings with a combined 15,928 square foot and over 9 acres of land. One building is a 14,680 sq. ft. Manufacturing and Fabrication Shop Space with three overhead cranes including (1) x 20-ton, (1) x 15-ton and (1) x 5-ton with multiple large overhead doors for easy loading and unloading of material and completed jobs. The second building is a freestanding 1,248 sq. ft. Office with Engineering/Drafting Space. The real estate also includes over 9 acres of land that a buyer could keep or parcel off.

Growth and Expansion: Immediate growth and increased profitability will be seen with a new owner/operator coming into the business with industry experience and good health to be active in the day-to-day management of the business. The current owner saw the reward of this until his recent health issues that are prompting the sale and his retirement. The business has been profitable with its current and long-established customer base. Actively pursuing new customers through improved marketing and sales efforts could grow the overall revenue of the business and drastically increase profits. The business currently operates on only one shift. The capacity exists to run a second shift to further capitalize on the existing facility and equipment. As a more long-term objective, the current owner recommends hiring and training a new foreman to replace the current, aging shop foreman within the next 2-3 years. This could improve productivity and morale in the shop area. The current foreman has significant industry knowledge that can be shared with the new owner and a new foreman trainee as the aging foreman transitions to retirement in the next several years.

Support/Training: Owner is including 4 weeks transition training included in the asking price.

Reason for Selling: Owner is selling to retire due to recent health issues. 

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