We don’t just boast about our past successes, we say the laughter and tears too. No transaction is simple or easy in the small-to-medium business world – so many parties are involved in even a sub-$1m transaction – landlords, franchisors, accountants, lawyers, employees, customers, suppliers, joint venture partners, families and so on. So many documentation to deal with – financial statements, loan documents, joint venture agreements, shareholder agreements, franchise agreements, leases, etc. Our job as your broker is to problem-solve. Whatever the problem, expected or not expected that may arise during the course of the transaction, we help you solve them, and we can solve them, since we have seen most of it, if not all of it.
Here we write about our first-hand experiences for some of the transactions that we’ve done, and hope to share with you the most real of this challenging, yet rewarding, small-to-medium business world.
Sold – Case Study 1 – Serviced Apartment – Feb 2020
Final sold price: $690,000
Buyer: local person who quit his full-time corporate job
The vendor is one of the early pioneers of short-term rentals, who took advantage of platforms like Airbnb, to establish this short-term rental business in Melbourne’s CBD. Unlike the more traditional motel/hotel businesses who have a lease covering the entire accommodation premise, It was a “fragmented lease” model – the vendor built its accommodation portfolio gradually as he negotiated and leased the units from 25 different apartment owners, under medium-term (3 year) leases, and then managed their units under a central umbrella – his own short-rental brand. The vendor also made the units look and feel consistent – he invested in identical furniture for all the units, thus creating the brand image. In just under 3 years, he was able to amass the impressive portfolio and run the operation in a systematic manner, thus creating value. The sale via Everest took a total of about 9 months, and a local buyer took over in the end. The sale created a sizable goodwill for the vendor which he truly deserves, given the time and efforts he had invested in to set up the entire operation so that the buyer can have a “turn-key”, stable business to inherit and grow from.
Valuation Technique Used
There’s not enough comparables in our knowledge to benchmark valuation on because the business was one of the earlier businesses based almost entirely on an Airbnb-style model, too few have traded at the time of the transaction to provide a meaningful sample size, so the comparables approach was not adopted. We also thought that motels (which we do sell many in a given year and thus have good comparables data) are not exactly suitable as comparables since their lease structures and accommodation types offered are quite different. In the end, a replacement-value approach was adopted taking into account the approximate time and efforts for the vendor to build the business from scratch on top of the value of the fixed assets (mainly furniture). The transacting parties both agreed that it’s a fair way to value the business and the transaction proceeded smoothly.
Sold – Case Study 2 – Specialty Printing – July 2020
Final sold price: $900,000
Buyer: local buyer with previous experience in traditional printing wishing
This is a rare independent business that partially competes with the franchise duopolies of Snap Printing and Kwik Kopy. But this business stands out by offering far more than traditional commercial printing. It prints on trophies, jugs, T-shirts and large billboards etc. It offers a full one-stop shop service thus it thrives in a niche market, which allowed it to have high margins. The customer base is relatively diverse but a the top 10 largest customers still accounted for over 50% of sales so this was considered a major risk in the valuation negotiations.
Given the relatively specialised nature of the business, the contract of sale included a relatively long buyer-training period of 4 months, over which time the vendor agreed to train the buyer on every aspect of the business so that the buyer can operate it even in the unlikely event that all 2 employees leave the business at the same time. As part of the transaction, the transacting parties agreed to have Everest holding 20% of the agreed purchase price in trust and released the funds to the vendor only after each month of post-settlement vendor training has been performed to the satisfaction of the buyer.
Valuation Technique Used
Since the Everest team had collectively sold 9 franchised printing businesses prior to this transaction, the valuation multiples from these deals were used as a benchmark, a further 0.5x multiple was agreed on top to recognise the specialty nature of the business and the relative lack of competition, plus a ~$150k worth of contracted work in the pipeline. It was overall a very satisfactory outcome for both sides.
Sold – Case Study 3 – eCommerce Store – August 2020
Final sold price: $350,000
Buyer: large Malaysian eCommerce group looking to expand into Australia
The business is a small online gift shop selling common gifts, particularly big on Christmas decorations etc. The vendor is a couple who runs the shop from home but has a product dispatch warehouse to do the sorting and dispatch from orders processed at home.
The buyer is a Malaysia-based eCommerce group which has a much larger product line of product offerings. Their strategy is to acquire an established business so it can quickly expand, so it is essentially purchasing the infrastructure, both online and the offline warehouse, for quick expansion. Since there eCommerce businesses are fairly common and there are numerous similar transactions worldwide, a valuation was quickly established and agreed by the parties based on comparables in other countries particularly in the US.
The transaction was completed without the vendor and buyer ever meeting each other physically. In fact, the Everest broker and supporting team also did not meet the two sides physically. All work were completed online remotely to achieve this smooth outcome.
Sold – Case Study 4 – Aged Care Centre – January 2021
Final sold price: $950,000
Buyer: nurse who works at the centre
The business is a Supported Residential Services (SRS) that the vendor has been operating for 22 years. The facility is a bit run down and its residents are almost all long term residents that have lived there since the vendor took over from day one. Cashflow is extremely predictable as a result.
Given the nature of the business, being highly regulated and requiring the operator to have extensive experience, the buyer pool is very limited. In the end the buyer was an experienced operator who already operates two other centres and a transaction was completed orderly. The process was relatively lengthy due to the regulatory registrations and handovers etc.
Sold – Case Study 5 – Child Care Centre (50-places) Business plus Property – March 2021
Final sold price – Business : $2,488,000
Final sold price – Property : $1,520,000
Buyer of Business: New entrant who obtained her provider number just 6 months ending her search with the purchase
Buyer of Property: local lady using the centre as superannuation. She owns one other centre in Blackburn too.
The centre had been operating since 2012 with 50 approved places. It’s the vendor’s 3rd childcare centre that she has built up from scratch in her 30-year early education career, and she sold it to retire for good. By being the owner of both the property and the business made the transaction much easier, as it avoided potential delays/uncertainties around landlord approval/transfer of premise lease. The buyer of the business however, did not intend to lie her capital in owning the freehold property and instead just preferred to buy as a lease-hold, which is not the most ideal outcome. The vendor happily provided a new long-term lease to the buyer and held the property in the interim. A separate sale process for the property was taken and took ~7 months to finalise after the business had been sold earlier.
Sold – Case Study 6 – Supported Residential Services (SRS) – Nov 2021
Final sold price: $2,800,000
Buyer: experienced local buyer
The business is a Supported Residential Services (SRS) that the vendor has been operating for 15 years. Again cashflow is extremely predictable – occupancy at 100%. The buyer had been looking for an opportunity for over 4 years but given that most operators tend to operate these centres over very long periods of time, very few opportunities go to market each year. Most of the centre owners also tend to know each other so many centres are taken up by peer operators before they could hit the market.
Sold – Case Study 7 – Auto Services – Nov 2021
Final sold price: $180,000
The business is a small garage located near Glen Waverley. The owner is a mechanic himself and employs 2 other part-timers. It’s clear from day one that the business is more like a job due to the owner’s heavy personal involvement under a typical owner-operator model, in which case very little goodwill could be expected from the sale. In the end a “Walk-in, Walk out” transaction was agreed and a younger buyer took over to carry on servicing the local community.
The “Walk-in, Walk-out” sale included all the tools and some inventory used in the daily operation of the garage. The parties agreed on just one week of hand-over period due to the buyer’s experience. Both part-time staff were retained and customers barely noticed the change.
Sold – Case Study 8 – Large Childcare Centre near Surrey Hills – March 2022
Final sold price: $2,565,000
This large childcare centre was on the market for over 12 months due to its modern fit-out and near-new equipment, and its large size. Two serious buyers came forward but failed to secure the necessary finance to proceed. Our in-house loan specialist Faye who’s a top ex-CBA loan writer helped with the loan for the final buyer via an equity-out of his investment property plus a smaller amount of unsecured business loans. The overall transaction was relatively drama-free since it’s a pretty standard childcare transaction. The buyer was qualified and the valuation was deemed fair via comparable sales.
Sold – Case Study 9 – Restaurant in Doncaster – March 2022
Final sold price: $217,500
Even though Everest does not proactively take on restaurant/hospitality listings, this Asian fusion restaurant was handled by the team as it was run by one of our senior broker, Dilun’s ex-customer’s in-laws. The restaurant itself was under-management so it did not take long before a buyer came along who wanted to keep the under-management mode of operation and run it as a side-gig to his well-paid PAYG job. As was normal in the restaurant business, there was a sizable cash component in the weekly takings and the parties agreed to apply a large discount to the cash component and valued the business in the middle of the restaurant multiples range. The relatively large size of local regular patrons played a foundation for the transaction to happen relatively smoothly.
Sold – Case Study 10 –Childcare Centre near Doncaster – Oct 2022
Final sold price: $2,565,000
Vendor had been operating for 9 years before he decided to pursue a major renovation to upgrade the centre’s hardware. Obviously the vendor had all the intention to operate the centre almost indefinitely, but the only thing that won’t change in life is change itself. Within a year after the renovation and re-opening of the centre, the vendor suffered a major illness which forced him to think about his next moves. The hard decision was made to sell the centre. Given that the centre was a relatively large one and due to Covid, the process was slow, but in the end an experienced buyer who already knows two other centres went ahead. The commercial terms were negotiated relatively quickly but the what’s unexpected by the parties was the consent, or lack of, from the premise landlord, who was overseas for extended periods. Initially the landlord was using Covid as an excuse to avoid the renegotiation of the lease but later it became apparent that he was reluctant to enter into a new lease with the buyer simply because of preference of the vendor as a tenant since the vendor had been a very good tenant to the landlord for over 10 years. The landlord’s indecision caused a near 3-month delay to settlement and the parties were on the edge of taking the matter publicly as it’s an “unreasonable denial/delay” by the landlord. In the end it’s resolved and the deal quickly settled afterwards.
Sold – Case Study 11 – Health and Nutrition Store near Tullamarine – May 2023
Final sold price: $650,000
An under-management health supplements/vitamin shop inside a Westfield shopping centre. The shop is a typical shopping centre retail outlet, independent, run by the vendor and 3 casual staff. The shop is mainly brick-and-mortar operation generating over 85% of revenue from repeat customers around the area. The shop had performed relatively well even during the most draconian Covid restriction periods and was coming out of that very strongly. The valuation took out the Covid abnormalities and focused on the post-Covid momentum and the 2 years before Covid, which showed consistent results. The buyer was a Malaysian entrepreneur on the investment visa scheme who needs to purchase and run an Australian business in order to be granted permanent residency. The buyer had no prior retail experience in his home country but spoke good English and had run a B2B medical devices wholesale business there, so many of his skillsets are transferable. What’s the more, the buyer did genuinely have a well-thought after plan to grow the business for the long term, not just simply for visa purposes. Soon after he took over, he invested heavily in completely re-creating the store’s website, drove hard in on-line marketing and launched a series of “under new management” initiatives within the store. Sales jumped as a result. Within 18 months of taking over the store, the buyer was able to open a second store under the same brand name in the inner west of Melbourne and obtained his permanent residence in record time. It was a very good outcome for the buyer overall.
Sold – Case Study 12 – Car Wash – June 2023
Final sold price: $700,000
A typical small car wash business in a business intersection in Geelong. The business has had a very stable 7 years under the vendor’s ownership and the vendor had a plan to turn the business into a fully automated self-wash station but some health issues prevented the vendor from executing his plan so a sale was considered to be an alternative.
The transaction went ahead relatively quickly and the parties relied on the Law Institute of Victoria’s SME standard template contract of sale of business, without the involvement of lawyers, as a result, the contracting process was much faster and settlement was reached within 6 weeks of offer being made.
Sold – Case Study 13 – Medical Clinic – July 2023
Final sold price: $1,500,000
This is one of the largest GP’s clinic in Melbourne Southeast where the owner couple, themselves GPs, have been working for 35 years. They sold the business and retired. The business and the property were sold together but in their valuation, the goodwill assigned to the GP practice was determined to be only symbolic at $50,000, as the premise, a street-corner residential house conversion, was quite old at over 55 years, and there were just 4 consultation rooms. At the time of sale, only one room was occupied by the owner who practices within the premise. His patients were highly loyal to the owner and most have been his clients for 10+ years. The value of the business is thus deemed to be only symbolic and the vast majority of value is assigned to be that of the property.
The buyer wad much younger and also a medical doctor who plans to completely renovate the premise and establish it as a modern GP’s premise. The location is considered to be attractive to GPs since there is only 1 similar clinic about 1.5km away. The sale is a classical example of a professional services business being bought by a younger professional to allow for a continuation of services in the local area.
Sold – Case Study 14 – Medium Size Hotel in eastern country Victoria – July 2023
Final sold price: $2,900,000
This is a well known and rare hotel in eastern country Victoria. The large local coal and power-generation industries provide a backbone for business travellers and industry conference’s throughout the year. The hotel has a sizable and fully-functioning conference centre that can seat 200 guests.
The hotel was originally listed for sale in 2020 but the process was delayed by at least 2.5 years due to Covid. Occupancy recovered rapidly after Covid and was in fact ~8% higher than 2019/pre-Covid levels. The local brown coal-to-hydrogen conversion project was heavily invested by a well known Japanese consortium, potentially brining in hundreds of millions each year in such new “coal revitalisation” projects, thus indirectly helping with the hotel’s occupancy levels.
Sold – Case Study 15 – CNC Machining Business – Nov 2023
Final sold price: $725,000
This business was very well known in the Dandenong area amongst factory owners. The vendor is a seasoned mechanical operator who can perform CAD design and CNC machining services to produce mainly replacement parts of any kind and shape to serve as replacement parts when near-by factories’ machinery breaks down. The business thrives on being able to produce replacement parts within a matter of days so that clients’ factories could repair their machinery as soon as possible.
The vendor was looking to sell after 25 years in the business and relocate to warmer Gold Coast, but he and Everest’s team agreed on day 1 that a sale would not be simply due to the very specialised nature of the business and its small scale – the owner of the business must be able to be very hands-on, able to get his hands dirty, literally. There are very limited number of people who have the skills and experience to operate in the highly specialised CNC industries.
The business was sold after almost 3 years, to a younger self-taught engineer, who retained the business’ 2 other full-time staff. As part of the deal however, the vendor agreed to train the buyer an entire year post-settlement.
Sold – Case Study 16 – Indoor Sports Centre – Nov 2023
Final sold price: $450,000
This small indoor sports centre was in Melbourne’s northwest, offering indoor cricket mainly, indoor simulated golf and some indoor netball. Its operating hours meant that the owner could run the business with just 2 part time staff and increase the staff count only during weekend busy hours.
The buyer was a couple who have their full-time PAYG professional jobs. Their plan was to invest another $50k or so to renovate the business and turn it into a dedicated indoor cricket venue.
Sold – Case Study 17 – Petrol/Service Station – Dec 2023
Final sold price: $950,000
This is a typical suburban independent service station, an increasingly rare opportunity in the market as more and more independent stations gets taken corporate by large franchise names such as BP, Liberty and Shell. The business is one of 15 owned by the same vendor, who wanted to recycle some capital into real estate development projects, which he considered to be having higher returns. Not surprisingly, numerous buyer enquiries were received within the first week of the listing going public and 2 serious offers came in very quickly after that, from 2 experienced operators who were looking to grow their portfolios.
The Everest’s team’s valuation was spot-on, due to the sector being a very mature one and the relatively large number of precedent sales which provided good comparables to determine the valuation multiples. EBITDA numbers were also relatively easily verified based on the fuel supplier invoices , adjusted for rents and owner-determined average margins. So the contracting stage process was quite straightforward and the parties got into execution stage very quickly.
