Joseph Associates International, Inc. has been retained to identify and develop strategic options for a premier distributor of plumbing supplies and cabinets in the Chicago market. Since being acquired in 1998 by the current owner, revenues have soared from about $1 million/yr to a peak of $47 million in 2007. This growth resulted from the owner’s single-minded focus on customer satisfaction in both service and competitive pricing. Although revenues have dropped as a result of the economic downturn, profitability has been maintained and a credit facility was recently opened with a new senior lender.
As can be seen in the graph below, growth has come with relatively low margins. Management believes that the current economic situation affords a great opportunity to expand both its market share and margins through acquisition. The cabinet division recently closed on the acquisition of a small manufacturer (custom cabinets and tops). This entity has WBE status which will be leveraged across all products lines. The plumbing business shares market leadership with a few other companies which comprise our primary target list for subsequent acquisitions. The first target is our client’s closest and would be a “fold-in”. Management believes they can achieve $1 million in overhead reduction. The target has already been contacted. This second phase has senior lender backing but will require also require private equity support.
