Custom Short-Run Envelope Manufacturer

Case Study

Successful Sale of a Custom Short-Run Envelope Manufacturer

Background

Summit Capital Advisors successfully facilitated the sale of a well-established custom envelope manufacturing business based in Ohio. The company had been in operation for over 80 years, specializing in short-run, quick-turnaround printing and converting. It served both direct customers and other commercial printers. With a reputation for quality, speed, and reliability, the company had become a leader in its niche market. The business employed a dedicated team of 20 skilled employees and operated out of a 35,000-square-foot, well-equipped leased facility. This established foundation and expertise made the company an attractive acquisition opportunity.

Transaction Overview

The business was listed for $1,250,000, with average annual revenue of $2,376,419, Seller’s Discretionary Earnings (SDE) of $385,236, and EBITDA of $274,488. Included in the sale were Furniture, Fixtures, and Equipment (FF&E) valued at $110,000, which included critical production machinery such as die cutters, folding and gluing machines, and printing equipment. The company’s inventory was valued at $263,185, providing a solid base of materials for continued operations. The business operated in a leased 35,000-square-foot facility, featuring three docks and convenient highway access. The lease was due for renewal, and the seller was in negotiations to secure favorable terms for the buyer, ensuring that the business would continue operating without disruptions.

Custom Short Run Envelope Manufacturer Photo 2
Challenges

Although the company had experienced decades of success, it faced a number of challenges at the time of the sale. The envelope manufacturing industry had been significantly impacted by the rise of digital communication and the subsequent decline in demand for physical mail. The COVID-19 pandemic added to these challenges, resulting in a 20% drop in demand in 2020 and early 2021. Additionally, the lease on the business’s production facility was nearing expiration, adding uncertainty to the deal structure, as a new owner would need to renegotiate the lease or relocate operations. Despite these pressures, the ownership group was focused on achieving liquidity from the sale while ensuring the continued involvement of the existing management team, who held an equity stake in the company. Maintaining leadership continuity post-sale was critical to ensuring a smooth transition and preserving the company’s customer relationships.

Approach and Execution

Summit Capital Advisors effectively marketed the company to both strategic and individual buyers. The approach emphasized the business’s resilience, strong historical performance, and the potential for future growth. Special attention was given to the company’s remarkable post-COVID recovery, which included a 34% revenue growth in 2022. This growth demonstrated the company’s ability to bounce back from challenging times and was an attractive selling point for prospective buyers.

The marketing strategy also highlighted the company’s efficient operations, including its specialized capabilities in short-run, high-quality envelope production, and its loyal customer base. Buyers were attracted to the opportunity for growth by adding additional shifts, exploring untapped marketing channels, and the possibility of pursuing bolt-on acquisitions to expand the business further.

A critical element in the marketing campaign was the continuity of leadership. The existing management team, which had deep knowledge of the company’s operations and strong relationships with customers, expressed a willingness to remain with the business post-sale. This was a key factor in reassuring potential buyers that the company could continue its operations seamlessly and that client relationships would be maintained.

Results

The company was sold to a buyer already operating in the print and paper products sector. The buyer recognized the strong value in acquiring a well-established company with a loyal customer base, proven operational efficiency, and significant potential for further growth. The integration of the business into the buyer’s broader portfolio provided synergies that enhanced the overall value of the acquisition.

The buyer retained the management team, ensuring continuity and leveraging their experience to drive future growth. This decision allowed the business to continue operating without disruption and helped maintain customer confidence. The buyer also successfully negotiated a lease renewal for the 35,000-square-foot facility, securing the business’s operations in the same location and avoiding any potential relocation risks.

The transition was smooth, with the management team providing valuable insights and support during the handover. The buyer was able to hit the ground running, benefiting from the company’s established infrastructure and experienced workforce. Additionally, the buyer saw immediate opportunities for growth by leveraging the company’s existing assets and exploring new avenues for marketing and sales.

Key Takeaways
  • Resilience and Recovery: Despite the challenges posed by the COVID-19 pandemic, the company demonstrated strong recovery, including a 34% revenue growth in 2022. This resilience underscored the business’s ability to thrive even in uncertain economic conditions.
  • Leadership Continuity: Retaining the management team was essential in maintaining operational continuity and preserving the company’s customer relationships. The management team’s experience and knowledge of the business were invaluable assets for the new owner.
  • Niche Dominance: The company’s position as a market leader in custom short-run envelope manufacturing created a competitive advantage. Its high-touch, specialized service offering allowed it to stand out in a niche segment, making it an attractive acquisition for buyers in related industries.
  • Scalability: The business’s efficient operations, strong customer base, and underutilized capacity provided significant opportunities for future growth. A new owner could expand operations by adding shifts, targeting new markets, and exploring potential acquisitions.
Conclusion

Summit Capital Advisors successfully positioned and sold this custom short-run envelope manufacturer by highlighting the company’s market leadership, operational efficiency, and strong growth potential. The business’s ability to rebound from the pandemic, combined with its loyal customer base and skilled workforce, made it an attractive acquisition for the right buyer. This transaction demonstrates the importance of leadership continuity, strategic positioning, and sector expertise in successfully navigating the sale of a middle-market manufacturing business. By focusing on these critical aspects, Summit Capital Advisors ensured a smooth transition and positioned the business for continued success under new ownership.

Let's Talk About Your Business and Goals

Contact an Advisor

Do you have a similar business you are considering selling or are you looking to buy a business like this? At Summit Capital Advisors, we look forward to speaking with you about your business goals, whether you are a business owner or a prospective buyer.

Please contact us via the form below to begin a confidential conversation.