Current valuation multiples for industrial equipment distributors

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May 28, 2023

by a searcher from Cornell University in Schaumburg, IL, USA

Hello, we are planning on making an offer to an equipment distributor; does anyone know what a current range of valuation multiples are for these types of companies or any good sources for this data? The types of equipment sold are valued at around $1-2mm. The company is a stocking dealer that will import the equipment from abroad and assemble it onsite for the client but that is the extent of their value added services. They never really hold any inventory (even spare parts). Also, does anyone know funding sources that like opportunities in this sector, as we have an experienced management team assembled with a plan to turn this into a higher margin, more scalable, additional value-added services company over time ? Thanks in advance. ^redacted‌

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commentor profile
Reply by an intermediary
from University of Arizona in Denver, CO, USA
Based on what you outlined I would ask your SBA lender to provide a multiple from their sources or you can email me and I’ll assist you. You will need to pay close attention to NWC because if they do not understand that they will need to provide it you will face a tough uphill battle. If their broker did not explain it already they need a new broker. The ‘cash free debt free’ statement is tossed around by inexperienced brokers and it poisons the seller when the rubber meets the road. Seller assume the AP is theirs. It is not, it belongs to the business.
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Reply by a searcher
from National University of Ireland, Galway in Seattle, WA, USA
I only have experience with a couple of failed transactions from a seller perspective. In both cases the multiples were low relative to businesses who have their own brand of equipment. Distributors / reseller profits seem to be discounted by buyers due to the risk of loosing the territory exclusivity, if there is any. If you do get industry data for resellers then maybe add discount or premium, depending on the actual risk of loosing rights in this scenario.
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