Buyer's market: tech-driven acquisitions are firm's stock in trade

Entrepreneur, March, 1997 by Charles R. Drummond

The Markets: The Eastwind Group has the following goals:

* Acquire underperforming middle-market manufacturing businesses in fragmented industries or those that are near or at the bottom of their cycle. Create dominant performers through consolidation, management restructuring and re-engineering.

* Expand the acquired businesses through further strategic acquisitions that support existing internal growth.

The Sizzle: The most appealing aspect of East-wind is that management is focused on acquiring undervalued or underutilized assets at favorable prices and making them profitable, The improvement in profits of its two most recent acquisitions, Centennial Printing and Ivy Industries, suggests Eastwind is on the right track.

It is fairly early in this company's business cycle to draw the attention of large institutional investors; thus, Eastwind offers you the opportunity to invest in an undiscovered company that appears to have a promising future.

The Outlook

Past and projected sales and earnings

Year        Net sales      Operating       Earnings      Average
           in millions     income in       per share     shares
                         millions (loss)    (loss)     outstanding

1994          $5.246        $(0.928)        $(0.13)       690,000
1995         $15.433        $(0.258)        $(0.28)       929,828
1996(**)     $24.000         $1.400           $.500     2,810,000
1997(**)     $80.000         $3.300           $1.00     3,300,000

** ESTIMATED

The Risks: The primary risk is that management may be unable to locate and execute acquisitions. There is also the possibility the company could purchase a business that will be hampered by future economic pressures, thus dampening future earnings potential. At this point, Eastwind must be considered a speculative investment.

Historical Financial Performance: The company has total assets of $13.7 million; its portfolio includes Princeton Academic Press, Wickersham Printing Co., Polychem Corp. and Lavelle Co. Revenues increased substantially during the first nine months of 1996, driven primarily by 40 percent revenue growth in Polychem, which manufactures and distributes water treatment products. Eastwind estimates 1996 fourth-quarter revenues of $11 million will result in overall revenue growth of 60 percent between 1995 and 1996.

Projected Financial Performance: Management indicates they are involved in discussions with a bicycle company; if this acquisition is completed, the revenue and earnings projections in the chart (below, left) could prove to be very conservative.

At A Glance

Name: The Eastwind Group Inc. Net sales: $14.85 million(*) Earnings: $470,700(*) Earnings per share: $0.21(*) Shares outstanding: 2,994,546(*) Recent price: $6,125(**) Stock market: Nasdaq Symbol: EWND

* For 9-month period ending 9/30/96

** For last quarter of 1996

Charles R. Drummond is director of research at Nutmeg Securities Ltd. in Westport, Connecticut. The above opinions are those of the author and not of Entrepreneur. These investment vehicles may not be right for you. Carefully investigate before investing.