Thursday 20 May 2021

A fair price for Front Rank?

There was a lively discussion yesterday over on the FB Napoleonic page following the announcement that Front Rank Miniatures is up for sale due to the owners impending retirement. Alec Brown started the business back in 1986 and the figures continue to have a healthy following to this day. You can read the announcement HERE if you have not already done so. The asking price of £260.000 (offers above £225.000 + £35.000 of stock) was the subject of debate, given the business currently has an annual turnover of £100.000. The price is for the company assets but not the shares. I just wonder what you all think about this, is this a fair asking price for this business? I have always liked their figures, although these days they do appear somewhat stocky in stature, something that was once more fashionable. It would be a terrible shame to lose such a popular and established range of figures so hopefully somebody with the  relevant experience will take it on for the future. When the old Hinchliffe was recently sold by Ian Hinds, also due to semi retirement - it was split up although all ranges remain available, One has to remind oneself just how long some of these old model soldier businesses have been around.

9 comments:

  1. The factor that I would have half an eye on would be the effects of Brexit and some of the recent difficulties that our Uk firms have had regards overseas importers having to be VAT registered, to collect VAT on behalf of the UK, the appears to be a few overseas buyers who have halted purchases due to this and high postage costs.

    I don’t have any idea what the implications are of the shares being retained by the original owner.

    I have some Front Rank stuff (artillery and Generals) and like them and there is still a ton of charm in the older sculpts.

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    1. It's been a boom year for hobby companies on the domestic market, tempered by the effects of Brexit and the high international postage costs as you say. As pointed out on the FB discussion taking on a business like this requires knowledge of the technical side of producing model soldiers, not just sales. Hopefully it will attract the right buyer.

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  2. So going on that - you could buy the company and have paid it off in 3 years??? Is that right? I also saw the thing about shares and wondered about that - I wonder who the shareholders are, and what dividends you're liable to...

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    1. Asking price is around twice annual turnover, speculation was profits around 50% (but just speculation). Not a bad little one man business ( or Alec and his Mrs in the case of Front Rank). The figures are so clean and crisp but top end prices at £1.35 per 28mm foot figure.

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  3. I like the figures and have a three large armies using the figures. If that is the actual return, that is quite a good business in the wargaming world.

    A few questions I would like answered if I was buying it. I would like to know who owns the other shares, who controls the company, subsidiaries and distributors etc, as when you buy you want control not ownership. How old are the molds, are the masters in good order, does that include the spin casters, company name, non competition clause for 5 years etc.

    On the other hand 260,000 pounds buys you a lot of sculpting and research these days and particularly as plastics really are taking a lion share of the market, in the historical ranges.

    my two cents
    Matt
    French Wargame Holidays

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  4. The turnover may be £100k p.a. but how much of that is profit considering your will have just invested £260k in the business?

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  5. The £100k is after costs but not tax liabilities. Reading on the manufacturers forum the set up is pretty standard in that ownership of the company is retained by the shareholders and effectively you start a new company so Front Rank soldiers ltd or something like that it’s primarily to allow original owners to minimise tax liabilities!
    My main question would be is Alec going to continue sculpting for the new owners? If not the you are going to have to find a sculptor who can match his style.
    I would imagine the moulds etc will be in pretty good condition Alec strikes me as being pretty meticulous - money aside though unlike my humble business where 3rd parties make the moulds and cast this is a full operation and a lot to learn.
    As to plastics whilst it’s a growing business it’s limited due to the high set up costs. Front Rank are very popular and I’m sure will continue to sell well. The worst thing would be if it didn’t sell and disappeared

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  6. That does seem very over priced to me if the 100k is turnover and not profit. Having sold a business a few years ago the rule of thumb is to fix a sale price of 3x annual profit (not turnover). If the 100k is turnover then I would be surprised if the profit is more than £30k which would give a sale price of more like £90k plus stock at valuation.

    As Graham says above, the selling of assets only for a small limited company is normal for tax reasons but also to make it more attractive to a purchaser as they cannot be exposed to any historical liability (from HMRC or the VAT office!).

    The last year has seen a boom in sales for many ecommerce hobby businesses (due to the pandemic) so the turnover would be likely to go down during the current year. A buyer would need to see the profits for the last three years to arrive at a realistic figure. The crucial thing is the profit amount after all running expenses and also, would it be cheaper to take your £260k and start your own business from scratch!

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    1. Lee - I just read the bumpf on the Front Rank website and it definitely says the profit is £100k so on the face of it that is a good price!

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