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From Divestments To Capital Raises, Acquisition Holding Company 1847 Holdings Is Streamlining Business And Shoring Up Capital To Position Itself For Growth In 2024

1847 Holdings isn't your traditional private equity firm that creates funds comprising collective investor capital. Instead, it buys small businesses with about $5 million of EBITDA and then deploys resources to strengthen the enterprise and improve operations. All that work can lead to a sale or IPO, often at a much higher valuation than 1847 Holdings paid. In other instances 1847 Holdings will hold onto the asset, contributing to the company's ability to pay regular and special dividends to investors. It also seems to know when to cut its losses and isn't afraid to divest a business if it means it will improve cash flow and margins.

Know When To Hold Em'

That was the case with the recent divestment of 1847 Asien Inc., the subsidiary that provides a wide variety of appliance services. 1847 Holdings said the move will reduce the PE firm's expenses by around $10.9 million a year and should have a positive impact on its overall margins. The divestment also reduces the company's total liabilities by about $4.5 million.

"This divestiture marks an important step in our strategic journey, one that is focused on operational profitability and shareholder value enhancement. Although we are disappointed that we were not able to turn operations as quickly as we had hoped, we believe that we are taking the right steps to enhance operating results in the immediate term and to better position our platform to provide growth capital to the divisions that are showing positive returns," said 1847 Holdings CEO Ellery Roberts when announcing the strategic move. "In turn, we are positioning ourselves to complete potential opportunities that we are currently reviewing and that we believe would be immediately accretive."

Going forward 1847 Holdings is focused on growing its core businesses and the profitability of those enterprises and freeing up capital to take advantage of accretive growth opportunities. The divestiture of 1847 Asien helps the company achieve both goals by streamlining operations, enabling it to allocate resources more efficiently, and better positioning 1847 Holdings for sustained growth and profitability, Roberts said.

Shoring Up Cash

Divesting is not the only way 1847 Holdings is trying to build value for its shareholders. The company also announced recently it secured a $1 million credit facility for its High Mountain Door & Trim Inc. unit which makes doors, door frames, baseboards, crown molding, cabinetry, bathroom sinks and cabinets and other products for homebuilders of single-family homes, commercial and multi-family developers. That unit has been delivering growth for 1847, with revenue up 44.5% year-over-year in 2023, despite the rising interest rates which have been negatively impacting the housing markets. "With strong customer demand, this credit facility provides High Mountain additional working capital to accelerate its growth, optimize its financial flexibility, support further expansion plans, and strengthen its position in the market without any equity dilution at either the 1847 or subsidiary level," said Roberts.

On the leverage front, the company is also making headway in lowering the amount it owes. In late February the PE firm announced it paid off $1.95 million in debt, following its recent public offering of securities for gross proceeds of $5 million. The company said eliminating the convertible notes enhances its balance sheet and removes potential equity overhang. All told, in the past few days 1847 Holdings said it has eliminated $6.4 million in outstanding debt and liabilities. "By restructuring our balance sheet, we are fortifying our financial foundation and better positioning our platform for growth and success," Roberts said.

Featured photo by Scott Graham on Unsplash.

Contact:
Ellery Roberts
eroberts@1847holdings.com

SOURCE: 1847 Holdings LLC