eNewsletter
June 2018

Featured Clients this issue:
**Details of each client below article

- Ecommerce Distributor of Consumables #918
- Full-Service Provider of Electronic Systems #2116
- Traffic Control Company #1017




Last month my team member, Scott Densmore, and I attended an industry conference in New Orleans. I have been attending similar conferences twice a year for over twenty years not only to stay current with changes in the industry, but primarily to interface with the forty plus Private Equity Groups ("PEGs") that usually attend these conferences. Over the years, I have sold numerous client companies to these PEGs for tens of millions of dollars, so these conferences rank high on my list of best uses of my time. In addition to completing transactions and getting leads on potential acquirers of client companies, I use this time to try to get a handle on trends that the PEGs are seeing in looking at transactions across the country and among different industries. Below are some of the key take aways from last month's conference.

Capital availability - It is estimated that there is over a trillion (yes the "T" word) dollars of investment capital looking to be deployed by buying privately held businesses. Frankly, the PEGs are having difficulty in finding appropriate businesses to buy and as a result they are becoming more open to the types, sizes, and locations of businesses that they will consider as a buyout target.

Industries of interest - Buyers, including PEGs, like predictable income streams. Three magic words: Monthly Recurring Revenue, are music to my ears because I know that PEGs and lenders will look closely at that type of investment. Two industries in particular seemed to be at or near the top of many wish lists: food and dental practices. Food because it is a consumable and the strong economy provides for additional discretionary spending on more exotic and expensive offerings. Dentistry because it not only ties to recurring revenue, and aging demographics, but sophisticated practice management techniques can increase revenue and decrease costs. Bottom line... if you have a business in either of these two industries and are thinking of selling within the next three years, now is probably a good time to explore your options. I would also add that if you have any type of business and are thinking of selling within the next three years, now is a good time to explore your options. 

Geography - Annecdotally, in addition to the information included in our featured article (Thank you Scott for putting this together.), when I am talking to a representative of a PEG, and that representative finds out that our firm is headquartered in Colorado, the usual response is something along the lines "What a great place to live. You have one of the best economies in the country. We would like to find an appropriate company to acquire in Colorado to add to our portfolio."

The article below discusses the concentration of PEG owned business in Colorado for these reasons. Additionally, we find that because of the availability of direct flights in and out of Colorado, it is a fairly easy travel destination and PEGs from Chicago and Dallas have a disproportionate interest in Colorado businesses, due to ease of access.

The  majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.

Ronald V. Chernak
President


 
Inspiring business relationships since 1982!
 

Private Equity is Hot in Colorado

When looking at the states with the highest number of Private Equity (PE) portfolio companies, it is no surprise that California, Texas, and New York top the chart. With an economy that is bigger than most countries, California is the clear winner due to sheer size. However, when you look at the number of PE-owned companies in each state per dollar of Gross Domestic Product (GDP), the numbers paint a different picture. Normalization by GDP drops California to number ten, and brings Colorado, Utah and Massachusetts into the top three.

 

Colorado definitely has a strong PE presence, with over 40 PE firms having offices located in the state. One of the largest firms, Resource Capital Group, has over 60 portfolio companies and a fund size over $2 Billion. Although the sunny skies and beautiful mountains may have something to do with the desire to do business here, it could also be the booming economy. US News & World Report recently ranked Colorado as having the #1 economy in the nation.

Popular industries for portfolio companies in Colorado are Manufacturing, Business Service, Industrials, and Technology. Ranging from Aerospace and Defense to Tires and Rubber, Manufacturing companies seem to have the highest demand followed by Business Services, such as Advertising and Security and Alarm Services. While PE acquisitions are usually thought of as requiring $1 million or more in EBITDA, PE firms have been known to be interested in businesses with a cash flow of $250,000.

For more information about how to sell your business to a Private Equity firm, contact The FBB Group. We would be happy to use our experience and industry relationships to help you maximize the value of your business in the marketplace.


 

Local Business Intermediary Earns Prestigious CBI Designation

FOR IMMEDIATE RELEASE                                                                                    
 
Colorado Springs, CO  -  The International Business Brokers Association (IBBA) is pleased to announce that Scott A. Densmore of The FBB Group Ltd. has earned the prestigious Certified Business Intermediary (CBI) designation. The CBI, which represents the gold standard in the business brokerage industry, is granted to individuals who complete required course work, pass an extensive competency exam, and agree to uphold the IBBA's Professional Standards and Code of Ethics.

"Earning the CBI takes dedication to the craft of business brokerage and demonstrates a personal commitment to excellence," stated Jeff Snell, IBBA Credentialing Committee Chair and 2019 IBBA Board Chair-Elect. "The CBI is a clear indicator of knowledge and experience, and we encourage business sellers and buyers to look for the CBI designation when selecting a business intermediary to work with," added Snell.


Scott A Densmore - Business Intermediary. Prior to joining The FBB Group, Scott served our country in Asia and the Middle East through his service in the United States Air Force and as a government contractor. His interest in business and his continual desire to learn led him through business school and on to starting multiple small companies. Scott has gained knowledge and experience in business planning, strategic financial advising, sales, marketing and operational analysis. He is a Certified Business Intermediary (CBI), a member of the Colorado Association of Business Intermediaries (CABI) and a member of the International Business Brokers Association (IBBA).
Ecommerce Distributor of Consumables #918
This Rocky Mountain business specializes in commercial distribution of office-related consumables to contracted clients.  With its steady history of growth in both sales and profits, this rapidly expanding business is set up to offer its services not only nationwide, but also internationally.  Excellent opportunity for not only a synergistic acquirer, but also an entrepreneur looking for the next venture.  Sales for the first four months of 2018 were up 17% over 2017; Adjusted EBITDA was up 149%!  
  • Purchase Price...TBS
  • Down Payment...TBS
  • Gross Sales...>$25,000,000
  • SDE...>$1,100,000

For more information contact Lynn Lage lynn@fbb.com.
Full-Service Provider of Electronic Systems #1118
This business-to-business service company installs and services fire alarm, security alarm, and communication systems.  It is well known in the industry for providing best in class design, engineering, installation, and monitoring services throughout the state of Colorado.  Thriving since its inception over 30 years ago, the company has prized relationships with large organizations that rely on its expertise in new installations and ongoing service.  As a  trusted and respected supplier to many large organizations , the company is positioned  for continued growth.  Real estate, with an estimated value of $435,000 (subject to appraisal), available to purchase with the business. Sales for 1st quarter of 2018 up 41%; SDE up 36%. 
  • Purchase Price...TBS
  • Down Payment...TBS
  • Gross Sales...$1,689,613
  • SDE...$365,942

For more information contact Lynn Lage lynn@fbb.com.
Traffic Control Company #1017
For over 20 years, this well-managed Traffic Control and Flagging Services Company has seen continued growth, due to its long term involvement with the Colorado Department of Transportation (CDOT) and various municipal projects.   The construction industry remains very strong in Colorado and this business is poised to capitalize on the state's infrastructure planning.   The owners are looking to retire, making this business a great acquisition for a regional industry buyer or an entrepreneur looking to acquire a well-established, profitable business and expand into other areas of the state.  
  • Purchase Price...$1,495,000
  • Down Payment...$385,000
  • Gross Sales ...$1,341,840
  • SDE...$441,981

For more information contact Rob Amerine rob@fbb.com.
**Terms & Definitions

TBS (To be suggested by Purchaser) - Seller, in his/her sole discretion, has the right to accept or reject all offers.

Seller's Discretionary Earnings (SDE):  A term used to denote a business's cash flow or the amount of pretax money a buyer can expect to earn in first-year operations.

EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization):   All interest, tax, depreciation and amortization entries in the Income Statement are reversed out from the bottom line Net Income (It purports to measure cash earnings without accrual accounting, canceling tax-jurisdiction effects, and canceling the effects of different capital structures.)
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