RE:Question on financing growthLongRoad wrote: Given DCM's debt and financial position, does anyone have any comments on how they could finance growth that would be beneficial to existing shareholders?
First off I'm a believer in that their Q3 (2nd worst quarter normally) was $1.9M EBITDA because of one time costs (name change, roll back) and loss of sales from the strike. Maybe their EBITDA would have looked like $3.5M-4M if this was a clean quarter. So maybe we are looking at $20M EBITDA plus $3.5M from cost savings as we roll into 2017, which is fine. The only real costs once severance is done is current income taxes, interest (800K per qtr), and capex (450K per qtr). The rest of the cash can go onto interest bearing debt, which is about $60M. Very manageable if EBITDA stabilizes at $20M+. I think they can use that free cash flow and a combo of fresh debt / share issuance (as long as the share price ($4+) is higher than book value) to handle any acquisition.
The other thing is this is so cheap considering we are trading at 1.5-2X EBITDA that I wonder if predatory bids might come a looking. Keep in mind DCM talks about consolidating a competitive market. But what happens if a bigger fish in the same space that does $200M EBITDA wants to consolidate DCM and get their clientele base & existing businsss?