The company opened its doors in 1969 as a manufacturer and designer of high security lock housings, mainly for the vending industry. Today, the company specializes in electronic access control systems, security asset management, cam locks, mortise locks, cylindrical lever sets, exit devices, doors, frames, closers, hinges, deadbolt locks, stand-alone code locks, high security padlocks, interchangeable cores, cabinet locks, high security cylinders, thresholds, weather stripping and a number of other products.
The company is a privately held C-Corporation wholly owned by the founding owners (51%) and their daughter and son-in-law (49%). The founding owners are ready to transition out of the business after 45 years of ownership and the 49% owners support their parent’s decision.
Finances for the company are conservatively managed, with healthy cash balances and no debt. The company is on a growth trajectory. From FY 2011 to 2017, sales grew from $2.7 million to almost $4.5 million. The company grew from $3.45 million in 2016 to $4.53 million in 2017 as the company expanded their offerings and sales force.
The EBITDA for the company and been stead over the last 4 years. From FY 2014 to FY 2017, EBITDA grew from $410,339 to $641,415, an increase of 56%. The trailing twelve months Adjusted EBITDA is $701,278. The company has been continuously profitable since 2011.
Summary of Investment Opportunity
The owners wish to sell the company and separately held assets for $4,500,000. The sales price includes 100% of the company’s stock as well as additional, separately held, assets in the form of real estate (8,000 sq. ft. building on 1 acre worth $900,000) and three light duty vehicles (approximately $10,000 in value).
The owners would like the transaction to be a stock sale since an asset sale would have a negative impact on their tax liability. However, the owners are open to an asset sale if the buyer would be willing to allocate the sales price in a way that would help to limit the owner’s tax liability.
In any sale, the founding owners would be leaving the company to transition into retirement. However, minority owners are flexible as to their role post sale. They understand the buyer may want to place new management in the company after the sale and they are willing to exit after a period of transition. At the same time, they understand that some buyers would prefer they continue to participate in the management team after the sale to provide continuity and they are willing to consider this possibility with negotiated employment agreements in place. They are also willing to discuss retaining an ownership position and remaining in the business if the buyer would like to discuss this possibility. In other words, they are willing to discuss different options with the right buyer.