xyz industries, inc. - businessexit.com and staffing in ... a diverse fabrication shop that can take...

* CONFIDENTIAL *

ABC Company

Memorandum for Sale

XYZ Industries, Inc.

* CONFIDENTIAL *

Introduction 1

Executive Summary

Company Overview 4

Financial Summary 4

Key Investment Considerations 5

The Company

Introduction and History 6

Operations 7

Products and Services 8

Markets 9

Ownership Structure 10

Employees and Key Personnel 11

Fixed Assets 12

Financial Summary & Outlook

Revenue 12

Profits 12

Pro Forma Income Statement 13

COGS Detail 13

Disclaimer 14

2 of 14

* CONFIDENTIAL * Internal Use Only-Confidential

© 2016 BusinessExit.com

Contact Information & Advisory Firm

Company Information

Legal Name: XYZ Industries, Inc.

Representative: Ronen Shefer – CEO ROCG Americas (Business Advisor) Address: 15 Oceanside Rd, Ocean City, Florida 34475 Telephone: 888-998-ROCG (7624) Fax: 561-245-4601 Email: [email protected]

Advisory Firm Description

ROCG is an international professional services and consulting firm with offices throughout North

America, Europe and the Asia Pacific region. We are the only international firm specializing in

the areas of strategy, finance, operations and business transition for privately owned and

emerging growth enterprises.

We are experts with a proprietary method of planning for transition and preparing an organization

for transfer of ownership, responsibilities and knowledge. Our services meet both organizational

and personal needs associated with succession because we align our solution to the

organization strategic goals and its unique human element.

We deliver by adopting and fully embracing a collaborative approach to our clients’ operating

issues to achieve impact through genuine insight. Collectively our principals have hundreds of

years of consulting experience with clients across a wide range of industries and we use our

experience to help our clients solve complex business problems.

Our understanding of the issues and drivers that impact individual industries, gives us a unique

ability to deliver outcome-driven solutions to complex business issues, solutions that drive

business performance and increase business value.

ROCG’s services include the following:

Business planning & strategy

Business development

Organizational Design and systemization

Human resources and people development

Business Transition

Financial advisory and monitoring

3 of 14



ROCG is proud to serve the following industries:

Manufacturing

Distribution

Construction and trade

Professional services firms

Financial Services & Institution

Travel, lodging and food

Healthcare

Franchisees of major global brands

business start-ups

Government agencies

Qualification & Experience

Business transition and succession has been the core of ROCG service offering for several

years, ever since we identified that our aging client base is not properly planning for their

eventual exit. We spent two years developing the processes and methodologies we currently use

worldwide to assist organizations to tackle the issues surrounding succession, knowledge

transfer, grooming next generation leaders, as well as planning and implementing entire

organization transfer or sale.

Early on in our development, we discovered the lack of information and educational material on

the subject, let alone best practices. Not only were organizations not aware of the looming crises,

there were limited amount of information presented to them. As a result we developed a

proprietary highly rated workshop aimed at educating and motivating business owners and

organization leaders. Over the past 5 years we presented this workshop in over 15 cities around

the world including 8 in North America.

Today we are one of few consulting firms who possess practical experience on the subject

matter including experts in the human element and the psychology involved in organizational

succession.

4 of 14



Executive Summary

Company Overview XYZ Industries, Inc., (XYZ) was incorporated in July, 1997 when John Smith purchased the Florida

division of Oceanside Inc. Since 1997 XYZ has increased their sales volume ten times and moved

into new and larger facilities.

The company’s core competency, since its inception, has been high quality __________fabrication

for several key industries who demand quality and attention to details. In recent years, XYZ’s

ownership also purchased over $2 million dollars of equipment to enhance its operations including

a new _____________________________. Furthermore, all of XYZ’s manufacturing control

systems and CAD systems are state of the art and are compatible with most drawing file systems.

Financial Summary After a good track record post-recession, XYZ’s sales declined in 2013 while customers were

gearing up for new projects. Since then the company’s sales have recovered from $1,482,958 in

2013, to $1,724,668 in 2014 and $1,603,234 in 2015. The company continues to adjust its

overhead and staffing in 2016 but for now continues to outsource $175,000-$250,000 of work to

other shops which could be a great opportunity for the right buyer to assume this work internally.

Revenue and Adjusted EBITDA Trend

5 of 14



Key Investment Considerations The Company’s position within _______________________ industry and its strategic

relationship with some of the most coveted customers should serve as a great indicator that the

market still demands a quality focused shop such as XYZ. For the right strategic buyer, one with

a diverse fabrication shop that can take advantage of XYZ’s current outsourced parts and

opportunities XYZ cannot bid on, the Company can be a great addition and provide a clear

strategic value to those relationships. The following are some of the key strategic strengths that

are the foundations of XYZ’s future performance and investment value:

ISO 9001 Certification & Registration –XYZ is proud of its ISO 9001 registration and the Company’s ability to maintain it after each and every audit. Anyone who has attempted to obtain this registration or possess it currently can understand the importance of buying a company that is already registered.

Close Relationship with Valuable Customers – XYZ’s close relations and long history with

customers such has _________________________________ can provide a strategic buyer the opportunity to leverage these relationships and win additional work with these customers.

Bid Opportunities – Each and every year XYZ received several hundred opportunities to bid

on projects which they are not equipped to produce. As a result, a prospective strategic buyer can benefit from these opportunities and leverage XYZ’s relationship further.

Contract Manufacturing – Each year XYZ outsources $175,000-$250,000 of parts manufacturing to other shops around Florida (mainly ________). For the right strategic buyer this can serve as an immediate benefit by simply absorbing the outsourced parts and services into their current operations.

Quality – One of the keys to XYZ’s success and revenue growth can be clearly attributed to the Company’s commitment to quality and attention to details. Any prospective buyer will benefit greatly from the systems XYZ has put into place in order to adhere to the low tolerances required by their customers.

Prototypes – XYZ possess the ideal structure to bid on and win prototype work. By maintaining some of XYZ’s core competencies in this area a strategic buyer can certainly benefit from these capabilities.

Facilities – The Company can relocate around the ________ areas on short notice. Therefore,

if a strategic buyer can move the operation to his/her own facility, nearly $40,000 of annual expenses can be eliminated from the company’s operating expenses.

Skilled Workforce - Experienced and knowledgeable workforce beneficial to support

customers with problem solving particularly during the development and prototyping stage of new products.

6 of 14



Company’s Details

Location Oceanside, Florida 35555

Owner/Manager Title % of Ownership

John Smith President 100%

Type of Entity S-Corporation since 1992

Line of Business SIC

2015 Revenue $1,603,234 -7.04 % below 2014

2014 Revenue $1,724,668 16.30% above 2013

2013 Revenue $1,482,958 -33.39% below 2012

2012 Revenue $2,226,174 18.31% above 2011

2015

Products: Product Group A 65%

Product Group B 25%

Product Group C 10%

Markets: Market Segment A 25%

Market Segment B 20%

Market Segment C 15%

Several Others 40%

Facilities: Oceanside, FL - 8,000 sq. ft. – Product Group A

10,000 sq. ft. – Product Group B & C

Employees: 14 + Owners

7 of 14



The Company

Introduction and History

XYZ Industries, Inc., (XYZ) was incorporated in July, 1997 when John Smith purchased the

Florida division of Oceanside Inc. Since 1997 XYZ has increased their sales volume ten times

and moved into new and larger facilities.

Operations

On an annual basis the Company services nearly 150 customers as far as 500 miles from the shop

in Oceanside. These customers includes the likes of ___________________________________.

Each day the staff at XYZ receive dozens of opportunities to quote on projects from customers

and prospects including one of a kind prototype work and larger fabricating projects.

The staff, with the help of John, reviews every opportunity and the ones they feel can be fulfilled

to the customer’s demand are then priced and the proposal is delivered to the customers.

Once a job is awarded and the purchase order arrives at XYZ the company uses several tools to

ensure on time delivery as well as quality procedures to ensure the work meets or exceeds the

customer’s specifications.

PICTURES

8 of 14



XYZ Products and Services XYZ is a highly respected provider of ___________________ by over 150 customers. The

Company offers a complete range of solutions for ______________ including in

______________________. The following is a list of some of the key products and services

provided by the Company:

9 of 14



A summary of sales is as follows:

2013 2014 2015

Category Revenue Revenue Revenue

Product Category A $963,923 $1,121,034 $1,042,103

% of Total 65% 65% 65%

Product Category B $370,739 $431,168 $400,808

% of Total 25% 25% 25%

Product Category C $148,296 $172,456 $160,323

% of Total 10% 10% 10%

Total $1,482,958 $1,724,668 $1,603,234

Markets

One of the keys to XYZ’s success is the focus on providing quality work precisely to customers’

demand. Over the years XYZ was able to outlast several competitors who simply could not

perform once they were awarded the job. Another key to the Company’s success is the clear

direction by John and the sales team over the years to diversify the customer base. XYZ’s

Market are broken down into the following segments:

Industries Served

Pulp and paper

Audio

Communications

Power sources

Security scanners

Contract Manufacturers

Mining Equipment

Aviation Instruments

Air Conditioners

Barcode printers

Research and development

Recycling

Lasers

10 of 14



Ownership Structure

XYZ was incorporated and elected S-Corporation status in 1992. John Smith owns 100% of the

outstanding shares.

The following chart shows the position held by each shareholder:

% of 1st Year with 2015 2016

Shareholder Name Ownership Company Compensation Projected Comp

John Smith 100% 1992 $90,000 $90,000

Employees and Key Personnel

John is a “hands-on” manager, particularly related to sales and business development. There are

two key employees who perform most of the vital operational management functions for the

Company:

2015

Function People Wages

Senior Management 3 $116,500

Business Administration 3 $108,000

Manufacturing 8+part time $366,553

Total 14 $591,053

Wages and Benefits

XYZ’s wage and benefit package is competitive for the type of work required. The Company offers

the following benefits to full-time employees:

Availability of employee paid/payroll deduction supplemental insurance Paid Time Off - 2 weeks' vacation, 6 1/2 days paid holidays, 5 paid bonus/sick days $20,000 death benefit (which has been paid out once).

11 of 14



Fixed Assets

The assets are located in the Oceanside, Florida facilities. The Company’s fixed assets are

indicated in the chart below:

Estimated Fair Insured

Fixed Asset Book Value Market Value Replacement Value

Machinery & Equipment $ 1,169,514

Computer Equipment & Software 43,542

Vehicles 84,045

Leasehold Improvements 7,565

Furniture & Fixtures 5,537

Accumulated Depreciation (1,310,203)

$ 0 $ 600,000 $2,600,000

12 of 14



Financial Summary & Outlook

Revenue

Revenue is projected to increase over the next few years and return to pre 2012 levels

The projected increase in revenue is due to new demand from customers and overall recovery in the industry

About ______% of the revenue is generated from 10 key customers

Profits

The company will continue to operate under a minimal profit model until the company returns to $2,000,000 revenue model

While the company is projecting 23% gross profit, the right strategic buyer, who can absorb the outsourced parts, can increase gross profit to 30%.

The company is also projecting moderate increases to operating expenses between 2016 and 2019

Income Statement Strategic Earning Adjustment Detail

INTEREST – an adjustment in accordance with Earnings Before Interest, Taxes, Amortization and Depreciation (EBITDA)

OFFICER SALARY – an adjustment of $30,000 in the current officer salary assuming John will remain at some capacity with an annual salary of $60,000.

RENT – Assuming a strategic buyer will be able to move XYZ’s fabrication operation to their current facility, expenses will be reduced by about $40,000 per year. Otherwise rent will have to be adjusted back to actual. This adjustment assumed the powder-coating line will remain in the leased facility due to the cost of moving it.

LEASED EMPLOYEES – Assuming a strategic buyer will not require the additional temporary help will save approximately $10,000 per year.

OUTSOURCED PARTS – as indicated previously, XYZ currently outsources manufactured parts to other companies each year. For the right strategic buyer, this can be an immediate opportunity to fill current capacity. Add back is estimated at the 40% gross profits levels.

PROFESSIONAL FEES – Aside from the professional fees associated with the purchase of XYZ, the expectation is that a buyer will not be required to spend additional professional fees on a regular basis post transaction.

13 of 14



Historical & Pro Forma Income Statement for the Year Ending December 31, 2015

Adjusted Base Year Pro Forma

2013 2014 2015 2016 2017 2018

Revenue $1,482,958 $1,724,668 $1,603,234 $2,000,000 $2,150,000 $2,300,000

% growth -33.39% 16.30% -7.04% 24.75% 7.50% 6.98%

Cost of sales $1,220,226 $1,329,245 $1,225,428 $1,560,000 $1,677,000 $1,794,000

Gross Profit $262,732 $395,423 $377,806 $440,000 $473,000 $506,000

% of sales 17.72% 22.93% 23.57% 22.00% 22.00% 22.00%

Operating expenses $268,927 $323,049 $325,000 $325,000 $350,000 $350,000

% of sales 18.13% 18.73% 20.27% 16.25% 16.28% 15.22%

Operating income -$6,195 $72,374 $52,806 $115,000 $123,000 $156,000

% of sales -0.42% 4.20% 3.29% 5.75% 5.72% 6.78%

Depreciation $7,937 $5,000 $5,000 $5,000 $5,000 $5,000

Amortization $217 $217 $217 $217 $217 $217

Interest $8,384 $7,424 $7,500 $7,500 $7,500 $7,500

Strategic Normalizing

Salaries $40,000 $40,000 $30,000 $30,000 $30,000 $30,000

Leased Employees - $10,282 $10,000 $10,000 $10,000 $10,000

Professional fees $5,756 $8,682 $10,000 $7,500 $7,500 $7,500

Outsourced Parts* $50,000 $70,000 $70,000 $80,000 $90,000 $120,000

Rent** $40,000 $40,000 $40,000 $40,000 $40,000 $40,000

-

-

-

-

-

-

Strategic Earnings $146,099 $253,979 $225,523 $295,217 $313,217 $376,217

% of sales 9.85% 14.73% 14.07% 14.76% 14.57% 16.36%

* Assuming strategic buyer has __________ capabilities - Add back assumes margins only

** Assuming strategic buyer relocates XYZ's operation to existing facility

14 of 14



Disclaimer

This Information Memorandum is confidential and has been prepared for certain qualified potential

purchasers of XYZ Industries, Inc. (“XYZ” or the “Company”). The information in this Information

Memorandum is subject to a confidentiality agreement executed between the Company and the

recipient. The contents of the memorandum will not be disclosed or discussed without an express

written consent.

Statements contained in this document, which are not based on historical fact, are “forward-looking

statements” within the meaning of the private Securities Litigation Reform Act of 1995. Forward-

looking statements include statements regarding the Company’s future development activities, the

future condition and expansion of the Company’s markets, the Company’s ability to meet its

liquidity requirements, and the Company’s growth strategies, as well as other statements which

may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,”

“estimate,” “anticipate,” or similar terms. Statements not based on historical fact are forward-

looking statements involving risks and uncertainties that could cause a difference between actual

and projected results.

The statements of fact in this report have been obtained from, and are based on, sources the

Company believes to be reliable; neither the Company nor ROCG Americas guarantees their

accuracy, nor any such information may be incomplete or condensed. All opinions and estimates

included in this Memorandum are as of the date of this Memorandum and are subject to change

without notice. This Memorandum is for informational purposes only and is not intended as an

offer or solicitation with respect to the purchase or sale of a security.

xyz industries, inc. - businessexit.com and staffing in ... a diverse fabrication shop that can take...

Documents