1847's Strategic Sale: High Mountain Door & Trim's Appreciation

1847 Holdings LLC (NYSE American:EFSH) recently announced the successful sale of High Mountain Door & Trim Inc. (HMDT), a division of 1847 Cabinets, to Builders FirstSource, Inc. for more than double the original purchase price. This strategic move highlights 1847's ability to identify undervalued assets and enhance their value, ultimately benefiting shareholders.

HMDT's growth in revenue, such as the 44.5% year-over-year increase in 2023, significantly contributed to its increased value. The company specializes in finished carpentry products and services, working primarily with large homebuilders, commercial, and multi-family developers. This strong demand for HMDT's products, particularly from large homebuilders, drove its appreciation in value.

The strategic acquisition and integration of HMDT by 1847 Holdings played a crucial role in enhancing its value. 1847's investment thesis revolves around acquiring "solid" businesses for reasonable multiples of cash flow and strengthening their infrastructure and systems to improve operations. This approach led to a sale or IPO of an operating subsidiary at higher valuations than the purchase price.

The credit facility secured by HMDT also contributed to its financial flexibility and growth, ultimately impacting its increased value. The $1.0 million credit facility provided additional working capital to accelerate growth, optimize financial flexibility, support further expansion plans, and strengthen HMDT's market position without equity dilution at either the 1847 or subsidiary level.

The sale of HMDT reflects 1847's ability to identify undervalued assets and enhance their value. This transaction is part of 1847's broader strategy to optimize asset allocation and enhance overall shareholder returns, highlighting the significant gap between the company's market valuation and the intrinsic value of its portfolio companies. The proceeds from this sale will be used to strengthen 1847's financial position, pursue new growth initiatives, and potentially acquire other companies that offer accretive value and positive cash flow. This infusion of capital positions 1847 to take advantage of new opportunities for value creation and expansion, ultimately benefiting shareholders in the long run.