Field Notes: Scrap Metal Goldmine

Unlocking the Potential of a Strategic Recycling Business with Strong Financials and Expansion Opportunities

There’s gold in them there hills! You might be saying, Pete this Field Note is way off base. It doesn’t meet the typical search profile? I say, hey — dream big! And it’s not in my geographic area either. But seriously though, this metal recycling business, with its solid cash flow, high gross revenue, and strategic locations in a growing area, is a strong investment opportunity to the acquisition entrepreneur with the right rolodex. Based on the listing, the asking price appears justified by the business’s profitability, asset base, and potential for expansion. The seller’s willingness to provide support and training during the transition phase is a positive aspect, which will help with continuity. However, please note the seller’s representatives are offering the business through a competitive process.

Let’s break down the listing and take a look at the key financial and operational aspects of the business:

Financial Overview

• Asking Price: $11,995,000
• Cash Flow: $2,196,000
• Gross Revenue: $26,159,000
• EBITDA: $2,196,000
• FF&E (Furniture, Fixtures, & Equipment): $2,500,000 (included in the asking price)
• Inventory: $500,000 (included in the asking price)
• Real Estate: $1,750,000 (included in the asking price)

Business Operations

• Location: Irving, TX (Dallas County)
• Industry: Scrap metal recycling
• Established: 2015
• Employees: 16
• Building Size: 15,000 sq ft
• Facilities: Two strategic locations with warehouses, offices, and employee break rooms (first location on 3 acres, second location on 5 acres)
• Ownership Structure: Real estate is owned and included in the sale

Analysis

Valuation and Price Justification:

• The asking price is about 5.5 times the EBITDA, which is within typical multiples for established industrial businesses with high growth potential.
• The inclusion of FF&E and real estate in the asking price is significant to the overall valuation, suggesting tangible assets support operations.

Strengths:

• The business has two strategic locations in North Texas, offering a diverse array of scrap metal recycling sources.
• It has established methods for acquiring scrap metal, including commercial recycling, public purchasing, dealer purchasing, and industrial box accounts.
• The company’s non-ferrous materials focus sets it apart from competitors in a niche market.
• A strong company culture that values employees and promotes fair treatment of customers and vendors.

Risks and Considerations:

• The scrap metal industry can be cutthroat, you’ll need high integrity and consistent fair treatment to maintain a competitive edge.
• Inventory turnover is crucial in this industry. This means efficient operations and strong sales channels to keep ahead of the competition.
• The seller offers a small amount of financing, indicating that buyers may need significant upfront capital or additional financing options. (Work that rolodex)

Opportunities for Growth:

• The business can expand by targeting new industrial accounts, dealer traffic, and opening additional locations in strategic areas.
• Given the existing infrastructure, it could diversify into other types of recycling or expand its range of services. Maybe EV batteries?
• The business’s focus on non-ferrous materials provides opportunities to secure additional end buyers in niche markets.

Market and Location:

• The business’s location in a rapidly growing area suggests opportunities for expansion and increased customer base.

About: Silverwave Field Notes combs through and analyzes thousands of businesses available for sale so you don’t have to. We highlight businesses that may be of interest to entrepreneurs looking to acquire an existing business. We are not affiliated with the business listed for sale unless otherwise disclosed. The business highlighted above is listed on BizBuySell and is being sold through a ‘competitive process’. If you buy it, let me know. I’d like to write about your experience with the process.