Metal Fabrication Business for Sale – Equestrian Industry Profits
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Those big, big old panels of pipe corral, they're very, very heavy and you're not going to ship them very far. So you're really only going to serve this Orlando market. You're not going to go much further than that. So that is also going to constrain your growth. Costing and pricing well is harder than it seems. And a lot of these old school businesses don't do it so well. So Acquisition Anonymous.

Another episode of Acquisitions Anonymous. We don't have 100% gear anymore. And thumbs down on just the plus inventory levels.

Hello everyone and welcome back to another episode of Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses. I am one of your hosts, Bill D'Alessandro, and today I love the episode because one of our hosts brought a deal that they were personally interested in. So Heather brought a metal fabricator that caters to her hobby industry of equestrian and horses.

So this is a metal fabricator that makes corrals for horses. It's got $5 million of revenue, decent EBITDA. We speculate about whether it's SBA-financeable. It's been around for 30 years. We think it's a good starter deal for a searcher, nice and profitable, probably stable demand. We've never done anything like this before. So I hope you enjoy Heather and I discussing that deal on this episode of Acquisitions Anonymous.

Today's episode is brought to you by good friends of the podcast, Edler Zane. Edler Zane is the CPA firm for entrepreneurs. Not only have they supported over 100 acquisition entrepreneurs through quality of earnings and tax structuring, they also offer a full stack CPA solution for business owners and operators called the Builder's Package. The Builder's Package covers all of your tax, bookkeeping, and fractional CFO needs at one simple monthly price. To learn more, go to their website at edlerzane.com.

E-D-L-E-R-Z-A-I-N.com. That's Edler Zane. And tell them we sent you. All right. Heather, good to see you. Good to see you too, Bill. I'm excited for another episode of Acquisitions Anonymous. I feel like it's been you and me a couple of times lately. I know. We're the worker bees, I guess, right? We're showing up. We're really pulling this cart. We are. Mills and Gerds sometimes profiting off our efforts here. What are they doing? Yeah. Yeah.

I brought a deal. I'm not only here and showed up to record with you, but I brought a deal too. I am psyched. And I think this is a deal that is right up your alley, isn't it? It is right up my alley. Should I read it? Please read it. I will put it on the screen for our YouTube audience. Please read it. Okay. It is a Sunbelt listing. It is a high-end custom aluminum metal fabricator and machine shop. That's not the exciting part though. Okay.

I'll get to that. Well, the exciting part is right there in the photograph. It serves the equestrian industry. And that's what caught my eye because I love horses. So let's read on. Interesting.

The business has their own powder coating, water jet cutting, and sandblasting capabilities. There is also a small machine shop area. There are many long-term employees, several of which are key employees and will stay with the company. The seller has health concerns but would provide training and transition period as needed to a buyer as he wants them to be successful with the company. Real estate is also available for lease or purchase for an additional $3 million.

Some seller financing will be considered on a buyer by buyer basis. The business shows extremely well and will be very attractive to anyone who takes a serious look at it. Let's see, no brokers, no buyers, reps, et cetera. Asking price is two and a half million cashflow, 600,000 gross revenue is 5 million.

And just as seller financing, yes. I like the fact where it says SBA pre-qualified, no. Interesting. Yeah, which is interesting for this business. It looks like it was established in 1996, has 20 full-time employees, inventory value of $500,000, FF&E value of $500,000. We already said real estate of $3 million. So building size is 28,000 square feet.

What do you think, Bill? So let's talk about what this does. So this, help me, Heather, because you're the equestrian pro here. These guys, do they make from scratch horse trailers or do they customize like existing shells of trailers so they have different stall configurations inside for horses? What are they doing? I think it's pipe corrals or what we call pipe corrals. So I think what they're saying there is it's horse stalls, gate entrances,

signage, trailer fabrication. So it's a little bit of, I think it's pipe corrals and maybe, you know, configuring some things inside of trailers. So it's a lot of just metal cutting and welding. What is a pipe corral? So it's basically metal pipe of a certain size. I don't know what the size is that they basically cut and weld together so that you've got like four tiers. So the horse can't stick their head out or get their leg out. And it basically is high enough that

that the horse can't jump out. And then you create a stall out of that. And then you can piece them all together with these little jointers. And if you ever go to a barn, that's not a, like a wooden barn where the stalls are kind of out in the open, they're usually the, the enclosure is made out of this pipe material. So,

or a pipe corral. That's what I would think. Now I'm in the West and this business is in Orlando. It's very possible they use a different material there, but in California, you would see these pipe corrals in all kinds of configurations. And it's probably a lot of metal cutting inside a trailer. There's partitions depending on whether it's a slant load or a front load trailer. That's how the

horses walk in and how you kind of keep them separated from each other. So it's mainly just, to me, it sounds like metal cutting, sheet metal and pipe, and welding in different sizes and configurations. I don't mean to oversimplify, but in some ways, is this like a high-end custom fencing company? Like they build fences out of metal piping, you know, out of aluminum and in custom configs. And obviously it's not chicken wire or anything. It's got to stand up to a horse. It's like real metal. Yeah.

Yes. These are fences and corrals, right? To make the horses go where you want them to go and not go where you don't want them to go.

Exactly. And they do have to be, you know, very strong, right? A regular fence in your backyard might need to keep your dog in or whatever, or the critters out, but horses will lean against things. I had a horse in my backyard where I had this really nice white PVC fencing because it looks nicer than pipe corrals. And I learned the hard way that why people don't use that. Yeah.

because horses, my horse started leaning against it and started to realize with enough pressure, he could crack it and broke it several times in the same place. And we had to build a reinforcement. So pipe corrals are, are much stronger and horses won't be able to push their way out of the enclosure. So yeah, but it's fencing. Yeah.

But it's serious fencing. It's like heavy duty, keep a huge, really strong animal in fencing. Yes. And it's not like you think of regular fencing where they've got posts in the ground with concrete. This is usually very, I guess, modular. You know, you see a truck pull up with a bunch of them on the back and then you hook them all together in such a way that they can't fall down, but they're not really sunk into the ground. They sit there on their own weight, basically, because they're heavy. Exactly. Exactly.

Yeah, exactly. Because horses don't have fingers. They can't like grab and push it or anything. Yeah. It just needs to sit where it is. Yeah. Okay. So that sounds expensive. I would think. Yes. Yes. Yeah. It is expensive. Yeah.

So it says there are many long-term employees. So they said this is a custom metal fabrication shop. I imagine there is a bit of industry knowledge here and kind of how to make a pipe corral. But I would think you could probably teach somebody who knew how to weld metal pretty quick. I would think so. Yes, it's pretty simple. When you see the end product, it's a pretty simple product for sure. Okay. It also says they got 20 full-time employees.

Which strikes me as a lot for $5 million in sales. Makes me wonder if some of them are part-time or fractional or something like that. Yeah, I thought so too. That does sound like a lot. And I'm kind of interested in what's the total addressable market? What's the TAM here on this? Because obviously this is a very, very niche product. Yeah.

You have to be in an area where there's equestrian zoning, you know, how much equestrian zoning is around where this shop is located. And is the equestrian market in a growth mode, a stable mode, or, you know, could it possibly even be shrinking? This is Orlando, Florida.

I don't know the horse world in Orlando. There are parts of Florida that are very big equestrian hubs, you know, for certain types of sports, jumping or dressage or whatever. And whenever you have that, you'll usually have lots of different training barns near those kind of competition areas. So it could be that it's serving a market like that where the clients are very high end and

You know, there's two types of clients in the horse world. There's the high end. That's what I think we all think of, that horses are expensive. And there's a very, very high end clientele that money is no object. They have very fancy horses that they import from Europe and things like that. And there's another end of the market where it's just people who just love horses and are spending kind of their last dime just scraping it together to be able to have a horse at a stable where they might be boarding them. So I would be interested to know, like,

who are the clients? Are they that high end or that low end? Cause that would, that would make me think differently about the business. Yep. Um,

I have a friend actually who married a woman who was very into horses. And they actually moved to Orlando and bought like a horse farm and said that Orlando is like the Mecca of this stuff. Okay. So there you go. So that's what it's serving then, a very big horse competition community. Do you know if it was jumping or what they did? I'm not sure what she does. I think it's jumping. I think they do a lot of jumping down there.

What's interesting is that's the most expensive kind of end of the equestrian sports in the U.S. In Europe, it's dressage. But if it's jumping, people spend so much money on those horses that they spend, you know, money is no object for the corral or the trailer or anything else. Right.

that they may need to go along with the sport. So that sounds like a plus for this business, that they're in Orlando. So it's basically a metal job shop, right? And they're probably building custom corrals, maybe portable ones, but maybe just build them out at a horse farm and they kind of stay where they're put or build out a barn or build out a trailer. I would imagine the marketing for this is entirely word of mouth.

Oh, who did your corral? Oh, these are the guys. Yes. Yeah. You don't need salespeople. You don't need marketing. You don't need SEO because it's, it's a small world that they're serving. And that's absolutely how that would work for this business. Yeah. Which on one hand is great if you have a reputation and to some degree is what you're buying, right? That these guys are the, the fabricators for this stuff in this area. Yeah. On the other hand,

There's no proven ability to grow it. On one hand, you go, oh, maybe we just turn on the marketing and we really grow this thing. But also you would really like to see that they had spent some money on marketing and their average cost per lead was $1,000 and the average project was $10,000 and all we had to do was turn that up rather than prove from scratch that it can work. Right, right. And this is geographically constrained because of the...

You've taught me the weight of the product is just too heavy to ship, right? Those big, big old panels of pipe corral, they're very, very heavy and you're not going to ship them very far. So you're really only going to serve this Orlando market. You're not going to go much further than that.

So that is also going to constrain your growth. You know, you can't really do marketing and you can't really go to another geography realistically. Yeah, I'm sure I would want to talk to seller about, you know, do you have to construct all this on site?

You know, or how much of it in which case you got to send your guys or do you have to do it in the facility and then truck it? And how expensive is trucking? Is it per mile, et cetera? You really want to understand that because that tells you how big your market is.

Right. And it's a 28,000 square foot building, which they're saying they would sell to you for $3 million or they're going to rent it to you. When I see that they own the real estate, especially in a business like this, I get a little concerned as to whether the P&L that's showing this $600,000 of cash flow has already been hit for market value.

occupancy expense slash rent, right? If it hasn't, then you are not buying $600,000 of cash flow. You are going to buy whatever the delta is between what they've been expensing and what you're going to have to pay, whether it's a loan or a rent, it doesn't matter. We see that an awful lot that listings...

you know, aren't, aren't adjusted for the market rent that the buyer's going to have to pay. I think it always sets up a very funny negotiation dynamic because the seller, in this case, the seller owns a business on the real estate. The seller will often come out of the gate quoting an above market pricey rent figure here. And then you go,

Okay, I got to burden the P&L for that. And you realize that the seller just lost a multiple of the annual rent on purchase price, right, because of the adjusted EBITDA. And they go, wait, wait, wait, wait, wait. Actually, it's in my best interest to give you a below market rent, which you also probably shouldn't do. It needs to be pegged to market.

I did see an interesting deal where a below market rent was agreed upon basically to cover. I can't remember what the risk was, but there was a particular risk in the deal that kind of made it a little a little tough. And they gave a five or a seven year term on a below market rent agreement.

Interesting. To cover it. Yeah. So that was an interesting way of kind of getting at the number and was agreeable to both sides and they understood why they were doing it. And so you could always try that. But you're right. Most folks are going to want the expensive rent or the high rent the sellers are.

Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in

less time and with less friction so you can focus on the deal. Sign up for a free live Q&A session on SBA loans at visocap.net. Then click Zoom Sign Up in the top right corner. That's visocap.net and click Zoom Sign Up.

The thing that's also interesting, though, is a seller who owns real estate is potentially cutting off his nose to spite his face because real estate is valued on a cap rate of rent. So if you lock in a below market rate for seven years and real estate is usually on like a it works out reciprocally to like a 15 X multiple rent. So anything you put back in the business valuation at three or four X, you lose in the building valuation at 15 X. Yeah.

So if seller is trying to sell his building during that lease period, he has seriously impaired the value of his asset. Yeah, yeah, for sure. They have to be deciding that they're going to hold that asset and they just want to collect whatever rent they've agreed to collect probably long term because this business is going to stay here. Even after whatever term of lease is agreed upon between buyer and seller. This is manufacturing. You know, this is not something you you move readily. And if it's not growing, why would you move?

You know, there's a lot, there's no reason. So there, this is going to be your tenant long-term if you're the seller. That's right. So you have to think about that. Yeah. So it's gotta be market. Yeah. So, and also there's probably equipment here and stuff. It sounds like it says they have its own powder coating, water jet cutting and sandblasting capabilities. Yeah. You probably don't want to move. It's probably in everybody's best interest to negotiate market rent here. Yeah. And stay put. Yep. And stay put. Yep. Yeah. So you just want to see that $600,000 burden for that already. Yeah.

Let's talk about why he's moving. It's or why he's moving on rather. Seller has health concerns, but will provide training and transition period as needed as he wants buyer to be successful with the company. What, how do you read it? I'm reading that there's an illness that,

And it's a little uncertain how much time they can really put in. So if I'm a buyer, that's the way I read it is I, you know, it's not that you want people to tell you too personal of information, but you kind of need to know what's wrong to know if the seller is really going to be able to help you through a transition period. I've certainly seen deals where it was, you know, life threatening illness and seller really couldn't do much. Yeah.

you know, and they had to rely on employees or other folks to kind of help transition. It's risky. I think it's kind of a little bit scary for a buyer to step in when it's a health concern that is causing the sale.

It is. On the other hand, and as sad as it is, what I'm reading here is I agree. Like, it sounds like this person is sick and then they really want the person to take over their legacy and be successful, which sounds like probably terminal, which is sad. Yeah. At the same time, as far as business transition reasons go, this is one of my favorite as a buyer. Yeah.

Because it's an indication that they probably wouldn't have otherwise been selling. That this probably, you know, they don't have other businesses that are better. They don't know something you don't that's coming down the pipe, right? And they're trying to offload the business to you. This is like one of the purest reasons for selling, right? I can't own this anymore. I'm sick. I can't work in it or I'm going to pass away or my kids don't want it or whatever. So you kind of,

my level of trust is a little higher going into this transaction. Yeah. Yeah. I mean, assuming they're being honest about the illness. If that guy's not sick, that would be really messed up. Yeah. But you're right. It's probably, it's probably a good reason, a better reason than most. So yeah, absolutely. You just have to make sure that you've got a good team and that you're going to be able to at least get enough of a transition from the seller that you feel safe, you know, getting it done. Because again,

If someone is very sick, you know, these deals are going to take 90 to 120 days to close. So a lot can change in an illness in the course of an illness in that period of time. That's kind of I've seen it happen, I guess. So it's just something to think about. Yep. Yep. Agree. So interesting. The real estate says owner is willing to sell or lease the real estate. There are separate buildings for powder coating, sandblasting in a facility that is leased with a machine shop. So it seems like this is semi-custom.

Yeah. To this business. So it really is in everybody's best interest that the business stay put. Yeah. Right. I don't love that it's different buildings, though. I can just kind of almost picture what this looks like when you drive up. It's a little bit inefficient when it's all under different roofs. I don't know. I would like to understand that. Maybe. So, I mean, Michael's not here, but like in fireworks manufacturing, there's all these regulations. You have to do things in separate buildings. Uh-huh.

Okay. So I don't know if one of these is potentially explosive and so you want it not in the main facility. Yeah, or the dust or whatever. Yeah, that could be. Sure. Yeah. So there could be reasons. I'd want to understand that, which also tells you if this is inefficient and it just happens to be the seller on this property, maybe it is in your interest to move. Yeah. Yeah. Right? And then you'd want to understand what that would cost to move all your equipment. Right. Right.

What do you think about kind of the financial profile here, the margins and the price? They do half or half, sorry, $5 million of revenue, 600,000 of cash flow. Let's just assume that's burdens for rent and everything. Let's assume that's the real number. And they want 2.5 million, which is 4.1 times. What do you think about that? The 4.1 is way too high because of the fact we just established there's no growth, most likely, or very little.

So to me, I would only for a business of this size, sub a million EBITDA, no growth potential. It's not a four. It's not over a four. To me, it needs to be like three and a half or below. I'd be much happier at a three for something like this. It's not as good a margin as I would hope.

given that they're serving a really high end, hopefully they're serving a really high end type of client that probably doesn't care that much about price. So maybe that's an opportunity for a buyer. Maybe you can raise the margins and raise the prices and that's your growth, but that's tricky. That's always a big question mark whether you can really do that.

But it's a lower margin than I would have thought. I agree. I was sort of expecting it to be higher. It seems like I also wonder, I mean, obviously, they'd be huge metal input. I'm going to assume it's steel or aluminum or both. They got major commodity exposure here.

Also, right. And, you know, a lot steel, is it coming from China? Is it coming from somewhere else? I want to, I think sourcing your steel or your raw metal well here is potentially a real competitive advantage. I mean, you could come in and find, you can take 30% out of the cogs of this business.

You know, by sourcing your steel differently. I don't know. I mean, I know the tariff situation on steel is changing rapidly right now in early 2025. But there's a you've functionally got like one input and it's a commodity. And so if sellers not buying it, well, there could be some real upside there.

Yeah, absolutely. Right. Exactly. And that is hard to diligence because you're going to have to look at the inventory that they're leaving, which I said, I think they said was about 500,000. You're going to have to, you know, do a hard count on that and value it. There's

They're probably doing an accounting valuation and you want to do a market valuation. Like how much is it actually worth? And what should you be selling it for when you go to sell that inventory yourself? Very interesting point. Yeah. Yeah. So pricing, in order to do pricing right, you've got to understand input costing right. And so I think as a buyer of this, you would really need to understand how the seller is pricing his jobs.

Right as compared to his commodity inputs as compared to his labor cost inputs I have seen this business been around since 1996 so a while 30 plus years I've seen a lot of old manufacturing businesses like this not pricing their stuff correctly not having a sophisticated model for What your real cost of labor is? Oh the cost of this deal plus the tariff plus the freight What's my landed cost of the steel?

to my facility? What's it cost me to get it out there? How much do the guys cost to set it up and string it together? You know, do I need a reserve because the average job I got to go back once to straighten it out in a couple of weeks, you know, so costing and pricing well is harder than it seems. And a lot of these old school businesses don't do it so well.

I have seen a business where the whole value, it was a pipe type product like this too, but I want to say it was brass or copper that was brought over from Europe. Those were the foundries are, you know, typically in Europe rather than the U S for whatever the type of metal it was. And what they did was,

import a lot at once and have a very big inventory so that they could supply their customers very quickly. It was used for hand railings and things like that in public spaces and big buildings.

And so it all came down to how they valued that inventory, what they bought it for, what they sold it for. They had to get pretty sophisticated on the pricing and the costing. And the new buyer did do that, but the seller had not. So to your point, I think that's potentially something to look into here. You know, maybe you can do a better job of it. Maybe you can't. Maybe they're really good at it and you need to learn. Could be either way.

Yeah. So do you like this business, Heather? Is it financeable? Before you tell me if you like it, is it financeable? It is financeable. I don't know why it is. You know, they didn't say it was SBA pre-qualified, which of course doesn't mean anything, but I'm surprised they didn't.

It is financeable. It's a good size for an SBA loan. You'd want, you know, lender would want to see a buyer that's got some kind of background in manufacturing or, you know, some kind of fabrication, something like that, a blue collar type of supervision or something. But it's totally financeable. I do like the business. I think, you know, I think for someone who also is kind of connected to the equestrian world, this would be a fun one.

Because you'd always be talking to folks that are in that world and, you know, servicing them and you kind of get to make money while doing something you like as well. I think it's a nice business for somebody like that. Yeah, I agree. I think this is pending unless they put SBA financeable no for some reason that makes it really messy. Yeah.

You know, I like this as a searcher deal. It is big enough, like barely $600,000 where you can pay yourself and service your debt. And like this should work. Hopefully it's stable. It's been around for 30 years. You know, if you can say I've got a little bit of idea on how to grow this. So I'm not just buying myself a job while I pay off my SBA loan for 10 years. You know, you don't want some growth.

I like it for a searcher deal. Pretty good. Yeah, it's a good starter deal for somebody, I think. Yeah, it is. Yeah, structure it correctly. Yeah, if you structure correctly. And, you know, there's probably even enough room here in the P&L that if you've got good middle management, you don't have to be there absolutely every day. You know, cut metal.

Yeah, I would think so. Yeah, once you get it humming along. And 20 employees, I hope they know what they're doing. If they've got a team that size, yeah, I like it. So I think it's a decent deal. I do like it. Good find. Good find. This is represented by, it looks like Hunter Law at Sunbelt of Charlotte, North Carolina, where I'm from, but the business is in Orlando. So I don't know how Hunter got this listing, but...

It's a good one. So if you like this or are into horses like Heather and know more about this business, go ahead and tweet us on Twitter X or whatever, whatever the platform is called now. And if you like manufacturing businesses like this one, this is not the first one we have done on the show.

If you go to acquanon.com, you can find all almost 400 episodes we have done sorted by and sort by manufacturing deals and look for other ones like this if this floats your boat. So anything else to add, Heather, on this one? No, I like the deal. All right. We will wrap it up here. Thanks for attending this episode of Acquisitions Anonymous. We'll see you next time.