Our Client – The Vendor
Dawn Trading was one of Australia’s leading importers and distributors of hobby products, supplying: radio control models, plastic model construction kits, model wood ships and model rocketry plus a complete range of building and craft accessories. Run as a family business, it had commenced in 1966 with investments in the slot-car boom and then progressed to become a leading importer of general hobbies, supplying a broad spectrum of Australian retailers from national chains to niche hobby and toy shops. The Business dealt with 50+ suppliers, 30 of which were under exclusive distribution arrangements. These included manufactures across 20 countries, including USA, China, Japan, Europe, Spain, Britain, Italy, Korea and Taiwan.
Unfortunately, after many years running as a successful and profitable business, the advent of online gaming and shopping drove demand for hobby goods into decline. The Business’s fixed overheads became excessive relative to its revenues. Yet despite turnover and net profitability decreasing, gross margins continued to remain healthy. At the time of sale, Dawn Trading’s owner sought to retire and engaged Johnsons Corporate as specialist mid-market business brokers to assist with selling the Business.
The Sales Strategy
For a strategic acquirer, with an existing fixed cost infrastructure, this represented an attractive opportunity for a “bolt-on” acquisition. By overlaying Dawn Trading’s healthy gross margins on top of existing fixed costs, an acquirer would see a large portion of the gross profit drop straight to its bottom line earnings. Other benefits included access to new customers and experienced staff as well as exclusive supply arrangements for the Australian market.
Johnsons Corporate’s custom research & marketing focused on Distributors of Toy & Hobby Products, with secondary markets including wholesalers of educational toys and games, craft paints and glues, scrap booking supplies, and figurines & collectables. Johnsons ran a proactive direct marketing campaign that uncovered 14 qualified, interested parties. Although finding the right party was not straight-forward, further vetting and negotiations resulted in Offer and Acceptance being secured 28 weeks after going to market.
Established in 2004, Hobbies Australia is a hobby product importer and distributor supporting the Australian and New Zealand markets. With an experienced team of full time staff, it is one of the largest hobby distributors in Australia and supplies close to 300 retailers, including hobby stores, toy stores, electronics stores, gift stores and more.