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SM for sale...? Thanks DP

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  • SM for sale...? Thanks DP

    Thanks to David Powell for noting Standard Modern is up for sale, apparently.

    Is business this bad? I mean to be perhaps the only North American lathe manufacturer left...and the headline of the ad is "Profitable Business".

    I know I am poor but a bit over $1 million just does not seem like a lot for a business esp if the ad is correct and there is nearly half that in machinery (not sure in this case what "chattels" includes, sounds as if it is lathes waiting to be sold as opposed to factory machinery itself). There are a fair number of houses for about that much in TO.

    Just asking, the pictures are of poor quality, not that that matters but...

    Anyone in Ontario or Toronto specifically heard much more, fact or rumour?

  • #2
    Pretty efficient use of space to be able to manufacture "30 Dif Lathes (sic)
    Models" in a 12,000 SF facility.
    Profitable Business For Sale!!! Standard Modern Lathes

    ...Currently Located In Mississauga But Can Be Run From Anywhere! ...

    .

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    • #3
      Haas lathes are US-made, IIRC, though that's CNC.

      Businesses are sold for all sorts of reasons including the owners retiring, getting tired, etc. The ad says $400k after expenses which may or may not be good depending on how much those expenses are. 2.5x EBITDA sounds pretty low but I don't know jack about the machine tools business. In software, you often see businesses selling for 2.5 or more times _revenue_, and anywhere from that to 20x EBITDA.

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      • #4
        Also no mention of "debt load" being carried. Interest payments will be part of the expenses.

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        • #5
          Originally posted by bob_s
          Also no mention of "debt load" being carried. Interest payments will be part of the expenses.

          When you buy a business you insist on seeing the books-alll of them- for the last 3 years.
          Any closely held business can bury a lot of funny stuff in the books.

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          • #6
            Originally posted by bob_s
            Also no mention of "debt load" being carried.
            Oh yeah, very good point. That is a mouth that must be fed every month whether sales were good or not.

            Originally posted by Rustybolt
            Any closely held business can bury a lot of funny stuff in the books.
            Very true. Besides doing your due diligence on the books, a lot of this is also handled in the sale agreement, which gets more complex as the deal gets larger. At one extreme, you do an asset sale where you basically strip the old company of everything from the sign on the building to the toilet seats, but the original corporation remains a legal entity owned by the original owners, who pay themselves from the proceeds.

            This has the effect of leaving all the old liabilities with the original company. Typically sellers will do their best to avoid this as it usually results in the proceeds of the sale arriving as income rather than capital gains. With a distressed company though, it may be the only way to get a buyer.

            At the other end, a portion of 10% or more of the sale value will be held aside for 12-24 months, and used to pay anything on a list of surprises laid out in the sale agreement. The murkier things are, the larger and longer this gets.

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            • #7
              S M isn't that sadistic masochism strictly for bank managers etc and wierdscience Sorry Darin couldn't resist a wee pull at your leg there. Alistair
              Please excuse my typing as I have a form of parkinsons disease

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              • #8
                Speaking from experiance, buying a business is a whole lot more than just the chattel. There is good will also. Clients, contacts, resources, employees etc etc.

                I have seen profitable enterprises struggle after a key employee has left for whatever reason. He/she could have been the employee that knew how to do key tasks correctly or even efficiently... I have seen a key purchaser leave and soon after materials costs caused the company to layoff.. Of course they knew what she bought and from who and what price, but they couldnt duplicate her experiance and relationship with those suppliers.

                I guess my point is that maybe a key employee left.. or a key client and the ownership is tired and dont want to carry on the fight...simple things like that happen


                Hard to price the good will aspect. Thats why business like this are priced on the chattel alone.

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