Sale of Towing Company and Real Estate

Sale of Towing Company and Real Estate

Overview of Situation

This mid-size 25-year-old towing company had good sales and profitability and the seller owned the real estate which was 3.6 acres including a small office and a large towing storage yard. The site was zoned and permitted for towing and storage and the city was no longer issuing permits for towing and storage yards. Towing and storage yards were becoming difficult to find because many cities were no longer issuing permits, thus making the property an ideal expansion acquisition for another towing company.

The owner/seller wanted to sell both the business and the real estate together. However, the real estate value was much higher than the business value, and the earnings from the business would not support the debt service for a new loan on the real estate and business. Thus, a conventional buyer would not be able to obtain financing for the business and real estate.

Approach & Solution

Pacific Business Sales was the Business Broker representing the Seller. Our strategy was to find a towing industry buyer with sufficient cash flow in their business, combined with this company, to cover the debt service of the SBA loans for the acquisition of the company and real estate. SBA lenders consider this an expansion loan and use the combined income from the parent company and the target company in underwriting the debt service and financial ratios. Thus, with an industry buyer, the acquisition of the business plus the real estate would pencil out for debt service and profitability.

Results & Conclusion

Our firm found an LA-based towing company that was expanding into the Inland Empire and in need of another location with a yard. Pacific Business Sales ultimately procured the buyer, closing the transaction as a dual agent representing both buyer and seller.