NEW YORK, NY / ACCESSWIRE / April 24, 2024 / 1847 Holdings LLC. (AMEX:EFSH), a specialized holding company that buys undervalued and overlooked small and medium-sized businesses, is expanding its presence in the millwork, cabinetry and door manufacturer markets by signing a letter of intent to acquire a leading player in that space.
1847 Holdings is paying $16.75 million for the unnamed company operating out of Las Vegas. The target generated about $28.6 million in revenue, about $4.5 million in net income and roughly $5.2 million in adjusted EBITDA in 2023. That makes the company an ideal acquisition target for 1847. It typically targets businesses with EBITDA of $5 million or more that are being ignored by the marketplace. 1847 buys them at lower valuations and invests in the business to either spin it out or grow it as an 1847 portfolio company.
The acquisition target entered 2024 with a year's worth of contracted backlog booked, positioning it for growth in the current year. 1847 expects to close the deal in the third quarter of this year and is paying 3.2 times 2023 EBITDA in a leveraged buyout, and the PE firm plans to finance the deal with debt. It already owns Kyle's Custom Wood Shop, which specializes in custom wood, kitchen and bathroom cabinets, High Mountain Door & Trim, a maker of custom windows, doors and hardware and Innovative Cabinets & Design, which specializes in custom cabinetry. All of them are focused on the residential market - highlighting potential synergies between the portfolio companies - and operate under the company's Signature Home Craft (SHC) brand. The current buy will push 1847 further into the commercial side of things.
1847 Expands Market Coverage With This Buy
"This is a very attractive acquisition for our company," Ellery Roberts, CEO of 1847 Holdings said when announcing the transaction. "We have strong industry insights into the western US market for construction and the end market demand for cabinets, doors and millwork in particular. We intend to keep this transaction separate from our existing cabinet operations under the Signature Home Craft (SHC) brand. We see these as two separate paths for independent value creation, with SHC focused on residential, and the new target focused on commercial, mixed-use and high-density residential."
1847 has made a name for itself, acquiring small businesses and then deploying resources to strengthen the enterprise and improve operations with an eye toward spinning them out or growing them internally. The specialty PE firm targets consumer-facing companies and has a portfolio that includes everything from custom cabinetry to horns for vehicles.
With this latest buy, 1847 is covering both the residential and commercial sides of the business, positioning itself to capitalize on the continued growth in the industry. Take the kitchen cabinets market, for starters. It is expected to reach $96.05 billion by 2029 up from $75.66 billion in 2024, growing at a CAGR of 4.89%. Meanwhile, the door market is projected to reach $186.6 billion by 2030, growing at a CAGR of 5.1% between now and 2030.
Seeking Profitable Exits
"We negotiated compelling transaction terms, and we believe we can successfully complete this transaction without a need to raise any additional equity at this time. We see this as a uniquely accretive opportunity that we believe will drive shareholder value," Roberts said of the company's pending buy. While it is not clear if 1847 plans to eventually spin off its new buy or keep it in house, historical patterns suggest investors may potentially be in for a bit of a windfall.
That was the case with 1847 Goedeker's. In April 2019, 1847 paid $6.5 million for the online purveyor of appliances, furniture and home goods. By June 2021, when it went public, the company was valued at roughly $60 million. The PE firm also recently engaged Spartan Capital Securities, LLC., to pursue a potential spinoff of 1847 Cabinets Inc., a designer, manufacturer and installer of cabinets, doors and millwork for residential construction. 1847 is hoping to capitalize on the growth and outlook for the company by either a spin-off of 1847 cabinets into a separate publicly traded company, or a sale to a well-paying suitor.
"We like things that are driven by consumer metrics and consumer buying habits. It's just easier to gauge and understand," says Roberts. "We will also look for businesses that are B2B and businesses that are driven by regulatory guidance such as finance, healthcare and education. We like to stay close to our knitting."
With this deal almost in the books, don't expect 1847 to sit idly by. The company is in acquisition mode, looking for more opportunities to grow its portfolio companies and make more money for investors in the months to come.
Featured photo by Andrew Ruiz on Unsplash.
Contact:
Ellery Roberts
[email protected]
SOURCE: 1847 Holdings LLC