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Monthly Update – November 2019

November 2019

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

– B2B Specialty Equipment Service Business #1919
– Two Exceptional Home Building Centers in Rural Colorado #1719/1819
–  Landscape, Irrigation, and Erosion Control Business  #2118

Proactive Tax and Transition Planning
Most businesses have a calendar year end. With that in mind, it is time for business owners to sit down with their tax advisors and plan to manage their business and personal taxes for 2019, if they have not already done so. Although no one likes to pay taxes, if you are planning to sell your business within the next five years you should be cognizant of the impact that any tax mitigation strategies may have on the value of your business, when you plan to sell. Yes, I know that five years sounds like a long time. However, most buyers, their advisors, and lenders look at the most recent five years when doing their valuation and due diligence.

Ideally your advisor can work with you to implement strategies to mitigate taxes without negatively impacting the value of your business. The use of retirement accounts is an example of that type of planning, as part of the valuation process involves recasting financial statements and tax returns. By developing a paper trail of legitimate deductions, your M&A advisor can “recast” your income statement by adding back contributions to the owner’s retirement accounts.

In addition to positive actions to apply, you also need to avoid negative actions that will diminish value. For example, deferring income and accelerating expenses. Buyers expect to see consistent rules for the recognition of income and expenses. One way to “have your cake and eat it too” is to have accurate Accrued Basis financial statements, but report your taxes on a Cash Basis. This does not work for all businesses and you should work with a qualified accountant to implement this strategy thoughtfully.

A typical strategy that we see with companies that use expensive equipment is to buy equipment at year end to reduce taxes. If you truly need the equipment and it will provide an appropriate ROI, acquire it. But you might want to consider leasing instead of buying because most buyers will assume a lease. As most businesses are sold “Cash free/Debt free,” the seller winds up paying off any installment notes, including on vehicles. Feel free to contact us, if you have a question about the implications of your year end planning and its impact on a future business sale.

Is there a topic of interest that you would like to see covered in this newsletter? Please just let us know via telephone or email. Of course we will maintain your confidentiality.

Have a pleasant and safe Thanksgiving Holiday.  

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Ronald V. Chernak

Inspiring business relationships since 1982!

B2B Specialty Equipment Service Business  #1919

All Around Rec

This RELOCATABLE value-added distributor is in the business of providing custom park and playground equipment from around the world, with a focus on fun, creativity, and safety, to landscape architects, general contractors/developers, parks departments, amusement parks, schools, child care centers, and HOAs.  Currently, there is $1,400,000+ of signed contracts in the pipeline for 2020.  The company does not work with individual homeowners, but that market could be an opportunity for expansion.  Throughout the years, the company has consolidated its suppliers and focused on uniqueness, resulting in the company becoming a more exclusive business model.  This business could be expanded into surrounding states as another opportunity for expansion. 

  • Purchase Price…$1,795,000
  • Down Payment…$360,000 (est.) assumes SBA financing
  • Gross Sales…$3,043,351
  • SDE…$934,531 

For more information contact Mem Garrison, mem@fbb.com.

Two Home Building Centers in Rural Colorado #1718/1819

This is a unique opportunity to own two exceptional home building centers in rural Colorado. Their national brand recognition communicates quality and value. Decades of successful operations provides a loyal commercial and residential customer base, as well as consistent sales growth. Ownership has competent management and a well-trained staff that is expected to continue post-acquisition. The properties have been well-maintained with major upgrades in Spring, 2017. We believe this would be an excellent acquisition opportunity for an industry acquirer to get a foothold in the region and to take the business to the next level of growth. Contact Gary Curran.  

  • Purchase Price…TBS
  • Gross Sales…$6,088,626
  • SDE…$237,000

For more information contact Gary Curran, gary@fbb.com.

Landscape, Irrigation, and Erosion Control Business #2118

Well established company offers comprehensive environmental solutions, erosion control, perimeter control, and revegetation solutions for government entities, commercial developers, and the mining, oil, and gas industries. Specialized in storm water management and landscape and irrigation projects, they have several on-going maintenance agreements, including snow removal services. Most orders are from general contractors representing government agencies.  

  • Purchase Price…$5,995,000
  • Down Payment…$1,500,000
  • Gross Sales…$6,050,783 
  • Adjusted EBITDA…$1,920,759

For more information contact Mem Garrison, mem@fbb.com.

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