Acquisitions Anonymous - #1 for business buying, selling and operating - We signed an NDA for this big boy: $9.6M EBITDA Florida Armored ATM Services Business - Acquisitions Anonymous episode 147

Episode Date: December 7, 2022

Want to receive this listing in your inbox? Signup for our weekly newsletter:https://www.getrevue.co/profile/acquanon-----Michael Girdley (@Girdley) and Mills Snell (@thegeneralmills) talk about an Armored and ATM Service in Mid-Florida. In this episode, we discuss how this business works, tail & headwinds. We try to determine why a strategic purchaser has not yet purchased this business. Mike also provided a very insightful explanation, by comparing the past and present, of how digital money is replacing traditional forms of currency and how cash value is decreasing over time.-----Thanks to our sponsor!SMBash.com - Join us in Austin, TX, from April 27th - 30th, 2023, for one-on-one interaction with others who focus on buying, operating, and investing in the SMB and Micro-PE space.SMBash is a live gathering of SMB, Micro-PE, and ETA owners, operators, and investors.-----Show Notes:(00:00) - Introduction(01:33) - Our Sponsor is SMBash(02:55) - Deal & financials: Mid-Florida Armored and ATM Services(05:15) - This is a hot EBITDA Margin! Is this deal legit?(08:06) - Why hasn’t a strategic buyer bought this yet?(11:46) - What does this business do?(13:16) - What’s going on with cash as a payment method?(15:38) - What do we think about the margins? Is it a red flag?(20:38) - How did COVID affect this business?(22:24) - Is there a Moat around hiring? -----Additional episodes you might enjoy:#146 - Should we buy 239,000 Domain names?#145 - Is this design agency a good buy?#144 - We spot an amazing Business Broker#142 - Should we buy this Crossfit Gym?#141 - A very profitable B2B Internet Business in the Petcare Vertical#140 - Let’s SBA the heck out of this deal - with special Guest Heather EndresenSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Welcome back, everybody, to another episode of Acquisitions Anonymous. The Internet's number one podcast for small business M&A. I'm Mills Snell, one of your co-hosts, joined today by Michael Girdley, one of our other co-hosts. And we talk about a really fun deal. It's actually probably a little bit larger than what we typically discuss. It's $15 million in revenue, but $9.2 million in EBITDA, kind of a monster business. It's an ATM servicing, you know, armored cars, vaulting of cash, storage of cash, and cash handling.

Super, super interesting. We had an episode a little while back where we talked about ATMs themselves, and we alluded to this type of business. But here's one that's for sale in Florida. It's listed on Axiol, and we get a pretty decent amount of detail on it for it to be a teaser. We know the name of the company. We go to their website. We're able to check out some things.

It's a fascinating business. We talk about, are these margins sustainable? What questions would you have if you saw a business with kind of uncharacteristically high margins? some places to kind of push and dig a little bit further if you're looking at something like this. And we talked about a bunch of different dynamics with these types of businesses where it looks like there's a lot of owner reliance or where there's a lot of CAPEX in place. Super interesting. If you look at this business, if you end up going to dig further, please let us know.

It's super interesting to me. And I think it would be really cool to hear. I think it would make for a good site visit. Hope you enjoy the episode. and big thanks to our sponsor this week, S&Bash, amazing group of guys, amazing conference, and we'll see you there. Today's sponsor is Essim Bash.

Yeah, I made it to the conference last year in beautiful sunny downtown Orlando, Florida. It didn't sun, by the way. It rained the whole time. But it was a great conference. So, yeah, they're sponsoring again, and I think we love that show. I love speaking at it,

and I think totally recommend everybody consider going, especially if you're a small business owner-operator who wants to think about M&A, you know, it's a great, great conference. So I know you missed it last year. I was super bummed. I tested positive for COVID one hour before I was supposed to get on the flight. And I was like, maybe I could just ignore this, but it was definitely not the case. I got laid flat on my bottom. I liked it because it really opened my eyes up to kind of the future of conferences. Like I think the days of like Web Summit or like Dreamforce are these like huge like giant conferences. Like they're so lame. Like I don't think anybody wants to go to those. But I think much more interesting. intimate type things like with Smbash guys did. Super curated. Yeah. Yeah.

You get more focused content around what you're trying to do. You get people that are much more like, you can have real conversations with people and they can curate who comes. Like I think all that's really cool. So, thanks to April and Austin. All right. Well, we're happy to support them and we want them. So go there.

And you can go to Smbash.com. Is that right? SmbaSH.com sign up. So tell them we say, yeah. And we'll go from there. Hey, what's going on, Mills? You're in a quarter of episode? Yes.

Dude, dude, I found this deal. Well, actually it got sent to me. The best ones are the ones that always seem to get sent to me. And this one is a mid-Florida armored and ATM services, period, go gators. That's period. So anyway, so this is a business for sale. So I'll go ahead and read it. And I want to talk to you about it because it's pretty crazy.

So I found it on Axiol. And this is a teaser for them. So do you ever go on Axiol? Are you familiar with it? Oh, yeah. Oh, yeah. Bend a bunch of their events and stuff. They're pretty, I would say they're definitely a step above.

I like their model compared to other like online marketplaces like Biz by Cell, which are basically just listing type things. Like I like how it's somewhat curated and they manage interactions. And then they're really smart the way they've set it up. Like they don't actually charge anybody unless a deal closes. but then they take a small percentage of it. I will say they have changed their model. They've been trying to figure it out, and they got bought by a private equity firm. I think maybe within the past like two or three years, so they've been messing with pricing

and trying to figure out exactly what their model is going to be because for a while, there were no success fees, no transaction-related fees. It was just like membership model. Wow. Okay. So you think the latest is they're still doing just the, the success fee only or you think they're? I don't know because like I think at times they experimented with just like sellers and

investment bankers paying to be on the platform. And then they were trying to get sponsors and PE firms to pay. And then when they started rolling out the, you know, don't pay anything unless we'll just take a success fee. I know there's a lot of pushback on that. But maybe they've survived it. But they do like some very good like, I've been to some events that they've done that are like kind of hyper, like local, regional, like where they bring buyers and sellers together,

like invite only. Those, those were good. I met folks and like meaningful things came out of it. Huh. All right. Well, anyway, check it out. If you're interested, those of you in the buyer community, it is Axiol. A.xIAL.

I believe. And I'm still not paying anything and I saw this deal. So here we go. Okay. So the revenue of this business is 15.2 million. It does $9.2 million in EBITDA. And it is the category of business services, specifically armored car services and other business support services. I think this takes the record for the most claimed highest profitability business of anything we've ever looked at.

Even that like casino in Costa Rica that turned out not to be a casino. That was a brothel. Yeah. So a year ago, a year ago, dear listeners, we did a deal that turned out to be a casino. It said it was a casino in Costa Rica. And they did have a gambling table, but they also had a suspiciously large number of pictures of the rooms, like lots of rooms. And like, it turns out one of the listeners DM this later was like, hey, you guys have no clue what you're doing. That was not a casino.

That was a brothel. So we did the whole episode that we had. Like every brothel in Costa Rica is just a casino front and a brothel in the back. Yeah, it's, you know, Maso Medo is pretty much the same thing. So there you go. Okay, deal description. So this armored car thing, which I guarantee is not a brothel. It is for somebody looking for a solid return on the acquisition of a successful and profitable business in a growing market state like Florida. Do you want a solid profit margin mills and unusually good EBITA and an industry reasonable multiplier for the sale price? Then this is the business to buy. Headquartered in Tampa, Florida, mid-flora, is the, the, that's the name of it. I'm reading it literally what it says, is the most respected and successful, privately held company of its kind in the Southeast. It has provided cash movement, collection, verification, and deposit services to a myriad of public and private customers, including customs, the DEA, the FBI, school districts, and the Florida medical marijuana

industry. As of the end of April 22, rolling last 12 months revenue was $15 million, with an EBITA of $9.2 million, a complete revenue and expenses rolling, last 12 months to the end of June will be available shortly. Despite its high margins, mid-Flor routinely outbids and outperforms the big three competitors, namingly Brinks, Loomis, and Garda competition and continues to grow its business at their expense. Because of this industry expense, because of his industry expertise, the owner has been asked to consult on a number of cash storage, production, and movement issues throughout the country after building the business from a startup to its current success, who would like to sell it and move on to other

interest. Most, if not all, the management team employees would probably stand to operate the business in the same successful model he has created. This is a unique opportunity to acquire a vibrant, growing business, and a vital industry at a reasonable price. So, Mills, do you have your checkbook out? Oh my gosh, what do you think this would go for? 9.2 million in EBITDA, and it's a fairly recurring, reoccurring revenue model. Now, I mean, it's it's vaulting cash and moving cash in armored cars. I don't think it, I don't know, part, part of the dynamic here is at $9.2 million in EBITDA, this should, this like company shouldn't hit the market, right? Garta or Brinks or what's the other one? It says, Loomis, Loomis. One of them would gobble this thing up in a second. And maybe the seller

is just categorically opposed to a strategic buyer, but, you know, a strategic, strategic would probably pay like, I don't know, seven to nine times for this thing. Yeah. Or more, right? Maybe a financial buyer would pay that for this. So I can't figure out why it hasn't been sold and why it's actually on a platform. Yeah. What it's also interesting, you know, it looks like they sell to folks that I think are pretty

interesting, right? They list here capital C, the customs department, the U.S. Customs Department, the DEA, so the drug enforcement agency, the FBI school districts, and the Florida medical marijuana industry. So that makes me really wonder, like, what niche are they in that runs at 60% EBITA margins on 15 million in revenue? Is there something that is going on here where this guy maybe, you know, talks here about the owner has been asked to consult on a number of things where this owner may be just like, you know, the guy that gets called in for all kinds of odd job stuff and there's nobody else that can do it, which is fascinating to me. I mean, I guess when the DEA confiscates $60 million in cash out of a boat, like they have to do something with it. And maybe they call these guys. Maybe. I mean, this is, this is an asset intensive business. So, you know, I, I, this is one where you

immediately look at it and go, these margins are so high. I don't think it's, I don't think it's true. So you would really want to press on that. But also, this is a perfect example to say the EBITDA is one thing, but what's EBITDA minus CAPEX? Because to generate, you know, this level of revenue and this level of earnings, you're talking about, you know, a fleet, a massive fleet of really expensive trucks. There's also no mention of the real estate. I looked at a building not that long ago that was leased by one of these big three. And, you know, it's a call it a million dollar building, million and a half dollar building, but they had spent about half a million dollars worth of, you know, tenant improvement at their own cost to, you know, reinforce the concrete and do all

kinds of special things for security. And, you know, it makes, like, if, if the owner in this case owns the real estate associated with this, that is very, that's very critical. You can't just up and move one of these to another building, you know, overnight. There's a high switching cost associated with it. So I pulled up their website. It founded in 2001. It's called Mid-Florida, Florida Armored, Mid-Florida Armored, and they're the leading

Armour Transitation Service carrier throughout the state of Florida. They misspelled throughout, which bothers me. Tell me your Gen X without telling me your Gen X. Like, go nuts at the typos. But this guy, Danny Persuade. Persuade, Persuad, is the guy. It's interesting. They have very straightforward. Here are the three big services. They say they have armored transport, so we can click on that. why is there a guy with an apron on the website that it makes no sense whatsoever we take the risk you take the money i love that yes i don't want to get the money dirt on my shirt uh deposit pickup verification cash vaults and all that kind of stuff then he has ATM and bitcoin keeps your machines operating so kind of what we dug into with ATM machines these guys appear to also go in and run your um you know and run your ATM and

Bitcoin machines to make sure. They do not just make sure that they're stocked, but also operational as well. And they have technicians on staff that do this. And they collect and deposit the money with uniform personnel. So that happens too. And we talked before about kind of the risks around being in the Bitcoin ATM business at this point. The government is coming for those at some point. And then they have this third business line, which is a smart safe solution, which I think is one of those timer safes that can only be accessed by the pickup people. Yeah, those are awesome contracts because, you know, it's like, you know, inside, you know, hobby lobby, Target, you know, Walmart, you know, but even some convenience stores and stuff

like that, smart safes that are time locked and can't be gotten into after hours, but they manage the cash. A million percent. It has been, you know, I remember when I was a younger person getting started out in business or helping my parents back in the age. and it was 100% cash on everything. And it was just a crazy deal where, like, you know, it created this, this like almost wild, wild west thing

where people were carrying around so many valuables that could be easily accessed in the form of cash that like, you know, you'd have crazy stuff going on and lots of safety and dealing with all the cash handling and the positives and negatives of that. And then you look today and like some of the stuff I'm in, like we have 95 to 100% credit card electronics.

Like, no, like, somebody tries to pay with cash, and they're just like, they're like, no, thank you. We don't want it. So it's interesting to think about this in the context of that market, you know, the decay of cash as a thing, right, of being a real thing. Though I think things like the DEA and stuff like that, they're still going to run into that kind of stuff. A counterpoint to that is that, you know, as cash has been on the decline, as a payment,

payment method, you know, service providers certainly would have like seen some of that same attrition. And so if, if this is one of the ones that survived, if this is somebody who made it through, then you have, you know, some, some survivor, survivorship kind of benefit, right, and bias. That, you know, I'd be curious how they've done over the long term as their business model shifted away from ATMs or, you know, more towards some of these special contracts. Pretty interesting. Yeah.

Well, and I think I'd add to this, for me, when I'm looking at a teaser like this, I want to understand dig in first to the outliers. And there's an outlier thing here, which is, wait, you're in a commodity service business and you're running this high profit. Like, like, it just, there's something that doesn't smell right about that, right? Like, you know, there's something when I think you, and we haven't gotten the teaser on this. Or this is the teaser. We haven't gotten the SIM to understand what's really going on. This might be adjusted EBDA. or maybe it was really 920,000 and they just put it in the thing wrong, which I've seen

happen before. But like, it just doesn't make sense. Like, the best businesses in the world don't run this profitably. You know, I would dig into that absolutely first. Like, something, this is the part of the story that does not make sense whatsoever. Well, and we see this down market all the time, which is that the founder is doing something that, you know, structurally in the business allows them to operate with higher than industry average margins.

But then you as the new owner are never going to do that. You know, you like maybe ethically or logistically or, you know, just personally are not willing to do that thing that they did. It may just be that they're incredibly short-staffed and they wear a lot of hats. In this case, it's upmarket and you see it. That to me is usually very interesting, but a major red flag at this level of earnings. You would, I mean, there would be an amazing story to tell because just like we had an anonymous person on when we talked about the 8th, Routes for sale because of the just kind of security and interpersonal risk and not wanting to, you know, plaster your name and likeness all over the place when people know you deal with lots of cash.

This guy would definitely be that way to, I would have to imagine. But I think this industry, like our guests pointed out when we did that episode, I mean, it lends itself to some really interesting, quirky, kind of idiosyncratic people. I bet this guy, this would make, this would be an amazing site visit. Michael, get the Sim. Let's go to Tampa. Totally worth the trip. Get the Sim, let's go.

Are we going to go? I would do it. I'm being serious. Anytime. Oh, man. Yeah. I mean, look, I think there's a part of this that I'm like, look at the customers.

Like, they're all people that, like, touch on things that it's like, life's too short to be involved in that for me. like the Florida medical marijuana industry. Like, do I want to be in the cash handling for a bunch of people who are doing something that just happens to be state legal but is federal illegal? Like, it doesn't seem like fun. The DEA is carrying around millions of dollars that it took from drug dealers who are probably pissed that their money has disappeared.

And the FBI chases criminals. Like, there's not like, this isn't like, this doesn't really pass the how do I want to spend my day test. You know, it's in the same thing with gentlemen's clubs and, late-night bars. It's like, payday lending. I'm not that, I'm not that interested in. But, man, like, I think I've actually so excited to just discover the mystery of how this business is stupid profitable like this, if it is truly stupid profitable. I would bet dollars to donuts when you dig into it, it's definitely not running a 60% EBITA. Or, I mean, or if it is, it can be

running 60% EBDA, but the free cash flow margin is really a million dollars. Yeah. Yeah. I mean, the CAPEX on this is easily, I think, a million bucks a year, probably, you know, between a million and two million. And so, you know, that's not real money. You know, it's not real earnings. And so everybody wants to be paid a multiple of EBITDA, but at the end of the day, the free cash flow associated with you as the new owner. And then you add debt service on top of that, you know, and this this big hefty EBITDA number gets whittled away pretty significantly. But I would dig into the CAPEX and then figure out. what's this owner doing that you're not going to be able to do going forward that generates this level of earnings?

Well, and how much of the enterprise value here? The second question I would have besides, number one, what is going with this profitability number to dig into how much of this industry expertise they list here for the owner is something that is just bluster put in here by the broker and how much of it is really truly being contributed as value. this company, right? If this guy is the world's most renowned expert on cash storage for wet current, you know, wet damaged currency, uh, you know, that's really something, you know, that you have to, you know, factor in. Like, what happens if this guy dies or leaves the business and he's no longer motivated anymore to do this stuff? Um, that would be the second thing I'd really dig into. Like, how much of this is really seller dependent? And they put this sentence in here that has me scared, right? He's, because of his industry experience, the owner gets blah, blah, blah,

like there may be something in his reputation that's going to disappear when the business sells. Yeah, if he's the keynote speaker at all the industry association conferences, you know, and then he's gone, you know, how transferable, you know, is all that not, it definitely doesn't happen overnight. Yeah. You know, this is, this is also like one of those businesses that if you want to grow it, you know, guess what? You got to, you got to buy expensive or lease expensive pieces of real estate and buy expensive

of pieces of equipment to just move, you know, and you can see what they've done, right? They are, they're clustered in the southeast and they, you know, you can't just up and up and open operations in Colorado and, you know, as seamless of a way is what they're doing, kind of leapfrogging state to state. Yeah, a big, a big KAPX thing here. You know, I think it's, I think it's really interesting to maybe dig in also on this business to understand how much COVID helped or hurt it. You know, this feels like one where, you know, to get armored cars, for example, or to get employees who are ready to work in something like this, like you had a pretty hardcore cornered resource for going on 18 months that if somebody wanted to compete with you or grow, like they probably were not able to get new trucks.

So I don't know if you've seen kind of this kind of thing happening, but like my buddy who owns an auto repair shop up in Dallas, I talked to him yesterday. And he said, look, we're killing it. Do you want to know why we're killing it? Because all these people who would normally throw away a truck that is breaking all the time and sell it off to somebody else or it gets exported out of the country or whatever, like, we're killing it because all these people can't buy new trucks. So they have to draw $15,000 with us to replace transmissions every nine months or whatever. And they have no choice.

And so that's a huge COVID boost for that business. The downside is that's all stopping, right? You can buy a truck right now if you want to. And by the way, which my son, who has a 2008 Cadillac STS that we inherited from my 93-year-old grandmother is extremely excited about because he's sick of drive at grandma's car to school. But anyway, like, I would also dig into how much of this is a COVID bump. I mean, I think there's, I think you'd see that there's a significant amount of the revenue as a COVID bump digging into this business as well. And that's not a new thing just for this business, but it's something to look at for, every single business you're looking at now.

Like, how did COVID affect these numbers? And, you know, are they trying to sell at the top at a maximum price where they had a great, a great year? Yeah, I completely agree. I mean, there's the supply chain piece of that that is COVID related, maybe like creates demand or, you know, hurts demand, but also creates issues or creates, you know, bumps in like vendor relationships, but also the workforce piece of it, you know, it, I think right now is a really, really interesting job market.

And this is kind of skilled, semi-skilled. There's no licensure associated with being, you know, a driver for this. But a lot of times people will go get like certifications that are maybe kind of off the shelf or like from, you know, a technical or trade kind of school. If they're going to carry a weapon, you know, armed versus non-armed is a big differentiation in this industry. And you don't have to have a class ACDL in order to drive most of these trucks. And so, you know, it's a, I think there's a pretty good, like, wage progression and there's a pretty good, like, allure to people who, you know, don't necessarily have hard technical skills like, you know, a welder, right, or an HVAC or a plumber or something like that.

But it's, it's interesting to me to think about the overall job market and prospects. I think it feels like it's getting a little bit better, at least what we see in our business. there's a lot more, you know, demand from potential employees than we had, you know, even several months ago and definitely a year ago. Super interesting. Super interesting. All right. Well, okay, let's get the SIM and you're going to pick me up in your private jet or what?

Yes. Or we'll listener, this can be listener contribution. If you let us use your jet, you can tag along to the site visit.