Selling Your Distribution Business in Texas
Looking to Exit a Warehouse or Logistics Company?
If you own a third party logistics (3PL) company that handles distribution in Texas, you probably wouldn’t be surprised to hear that it’s a seller’s market right now!
Distribution companies have always been a hot commodity, but over the past year the pandemic revealed a greater demand for products and services, in turn causing a huge development boom in industrial real estate especially in the Longhorn State.
The top four hottest markets his year are Austin, Dallas-Fort Worth, San Antonio and Houston.
In fact, industrial vacancy rates in the DFW area fell to 6 percent with leasing hitting an all-time high of 9 million square feet and industrial construction on a major upswing.
High demand for distribution and warehouse space coupled with a history of million-dollar deals over the past decade means you should have a long line of potential buyers should you decide to sell your Texas-based logistics company.
Why Sell in 2022?
There is a lot of value in commercial real estate assets and inventory. Several big deals have been brokered in just the past year, including one by Elon Musk’s Boring Company in the Austin area. The tunneling company acquired a 40,000-square-foot warehouse in late 2020.
This year has seen a flurry of activity in the sector that just continues to grow. A few notable deals:
- Builders FirstSource Inc. of Dallas sold its Eastern U.S. Gypsum Distribution Operations to L&W Supply
- Houston Wire & Cable Co. sold its Southern Wire wire rope distribution business to Southern Rigging Cos.
Another trend that is rising along with e-commerce is the need for smaller warehouse spaces to hold small companies’ inventories and operations. This is in direct juxtaposition with Amazon, which has been buying out-of-business malls and anchor stores to expand its warehouse operations.
The COVID-19 pandemic has accelerated these trends in industrial real estate, with more turning to online shopping and dealing with gaps in the supply chain that didn’t exist before.
As such, a wide range of investors agree that purchasing warehouse assets is a good idea — including real estate investment trusts and foreign investment firms.
How to Sell
With many qualified buyers looking to enter the Texas market for the first time, how do you determine how much your distribution company is worth?
The good news is that it’s likely to fetch some serious cash, considering the average multiple is 3.47x, meaning the average asking price is three times bigger than gross income.
But before you get ahead of yourself, you’ll want to gather all your historical financial statements and put together a financial report, answering potential buyers’ questions.
Q&A Before Selling
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels (Amazon, etc.) do new customers come from, and what is the breakdown of each channel?
- What is your market position?
- Is your location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
Extra Value Services
- Same-day or next-day delivery
- Quality inspection
- Product kitting
- Vendor Managed Inventory (VMI)
- Training and education
- Light fabrication
Another thing that can make your business more attractive to buyers is to have a good relationship with your vendors. Because distribution companies are often in a battle with competitors over vendors, having a lineup of loyal vendors will help you stand out.
The same is true for a reliable list of customers. Put together some data on your customers to figure out which ones order the most products and the most often.
Including extra services is something else buyers look for. Extra value helps with customer retention and can give you an edge on your competition.
Why Hire DBG Advisors to Sell Your Distribution Company
DBG Advisors is a business brokerage firm and owner, Nolan Duck is a licensed commercial real estate broker. You might be wondering what this means, and why you should work with DBG to sell your company.
Sure, you can spend a lot of time and resources finding buyers and navigating the sale yourself, but hiring DBG can help streamline the transaction and ensure you’re getting the absolute best deal because DBG has experience selling distribution companies.
We are committed to our clients and customize our services to your needs. Among our specialties:
- Intimately knowing the local Texas commercial real estate market
- Negotiating and constructing offers
- Figuring out solid exit strategy plans
- Referring you to trusted Texas professionals and lenders
If you’re ready to sell your Texas-based distribution business, contact us today to get started on an exit plan.
What Sets DBG Advisors Apart
Connections within the North Texas business community and in larger Texas markets
Ability to market Texas based businesses to other buyers in DFW and even assist in out-of-state mergers and acquisitions
Specializing in family-owned businesses and small businesses up to the middle market.
Understanding and responding to the specific reasons you have for selling your Texas business, including as part of an exit plan, looking to retire comfortably, looking to move, selling a business in order to expand and grow, etc.