This Dairy Farm Makes $2.6M EBITDA… But in Romania

0:00Hello, everyone, and welcome back to another episode of Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses. I am one of your hosts, Bill Dalessandro, and today I am with my other three co-hosts, Michael, Mills, and Heather. And this is an off-the-wall one. Mills found and is enthused by a dairy farm in Romania running over a thousand cattle. and while this does seem off the wall it's pretty interesting because this is a commodity leveraged business with fixed costs so we talk a little bit about how to diligence a business where the revenue is very based on commodity prices we also talk about international deals so this was a fun one if you have ever thought about moving to Romania and buying a dairy farm you will love it so without further ado I hope you enjoy this episode of acquisitions anonymous

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1:34They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream a reality. Visit acquisitionlab.com today to learn more and schedule your free consultation. And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. So I think people should understand the pre-show prep for this is three minutes of somebody being like, what deal do you have? Oh, I have a dairy farm in Romania. And then somebody else like, I have a helicopter business. And then somebody else like, I have a drug trafficking operation. Check this out.

2:03And then we pick the dairy farm in Romania. So here we go. If you ever doubted that this show is live, it is. These are hot take reactions. So, I mean, this just really caught my attention for a bunch of different reasons. I've never looked at a business in Romania before. I wouldn't even know how to buy a business in Romania, to be honest. But this is on MergerCorp, which I don't think I've mergerscorp.com. I don't think I've ever been on this website, but I just kind of stumbled on it the other day. and it's a profitable and exclusive dairy farm business in Romania. Their asking price is 20 million euros.

2:43The revenue is almost 7 million euros and the EBITDA is 2.6 million and kind of change. So it says profitable, exclusive dairy farm for sale in Romania. The farm has an EU compliant waste management and animal welfare system. The business is managed and operated by a team of expert employees from various countries. Farm includes next to the milking cows and heifers, arable land cultivated to produce self-feed. Business uses state-of-the-art innovative high-tech to monitor and manage the herd's welfare and yield. Their operation is 2 ,000 head of cattle, nursery, heifers, and milking cows. They have a feed center, a milking parlor, veterinary and herd management, maintenance and construction.

3:31I don't really know what that means. Secondary activity is cultivating 600 hectares to feed the herd. So they plow, seed, fertilize, do herbicide and combine harvest and transport all the feed. The key data here is that they produced 12.3 million liters of EU quality milk sold in 2022. I think that's an interesting kind of clue. And then they have 630 hectares of total land, including agricultural terrain, least under cultivation. 40 ,000 square meter total building, including animal housing, feed center, milking parlor and other facilities. And between 2018 and 2022, their average annual increase was 16 % per year on average.

4:25and they reached 39.2 kilograms per cow per day. I have no idea if this is good or bad or impressive, but they also produce 40 % of their own electricity through solar panels on premise and they have 1 ,050 milking cows. So they're asking price here. They kind of repeat the financial information. Asking price is 2.89 times revenue and 7.6 times EBITDA. And it looks like this was originally listed back in October of 2023, but I just, I couldn't, I couldn't stay away. What do you guys think about this? It's a dairy farm in Romania? Yes. Do I have to move to Romania? You had me at hello. I think so, yes.

5:21Okay. Okay. So Mills, I'm curious, what part of you was like, you know what I really should do today? I should buy a dairy farm in Romania. Like walk me through your, because I've noticed a pattern here. For those of you long time listeners, you remember Mills a couple months ago. The first deal I've ever seen Mills pursue was a Wisconsin cheese farm. And I'm like, bro, you live in South Carolina, you work on roofs, like you know nothing about cheese. I'm also lactose intolerant. So what is the deal with you and milk? Like what's going on here? I don't know. I mean, this to me, this is interesting in a few different ways.

5:58One, I like looking at something new. So I've just never looked at, I don't think I've ever even looked at a dairy farm. I've looked at some different farming operations, but I don't think I've looked at a dairy farm. I don't think as far as dairy farms go, this is very large in terms of like industrialized farming. This is probably on the kind of small to medium size, plenty of mom and pop, but I think this is kind of medium size. But when you think about all the compliance and the hurdles and regulations to doing business in Europe and in the EU specifically, a business like this that gives you a huge head start is really, really interesting to me.

6:37certifications, the credentialing, the land. I don't know. I mean, this is obviously in a somewhat rural area to have 600 hectares, but there's just a lot about this that really just piqued my curiosity. So is there something special about the EU certifications? Is that like a moat here? Because I mean, I think they're selling it at 10 times earnings. Is that right? 7.6. 7.6. Oh, it's a bargain for a farm. Anyway, Well, so, but you got to, so take out the land value though, right? In a way, I'm assuming, they don't tell us this, but I'm assuming that the land is included. So let's just say there's, you know, they're asking$20 million.

7:16Let's say the land's worth 5 million or euros. Let's say the land's worth 5 million euros, just like you would any farming operation, you know, or any asset really intensive. The problem is, is that a lot of times these businesses, especially ag-focused businesses are so asset inefficient. I looked at this fish farming business like 10 years ago, and they wanted like$200 million because the land was so valuable, but they only generated like a million and a half dollars in EBITDA. And it's like, well, okay, you can have it one way or the other, but not both. Well, it's kind of like Arizona farms, right?

7:53A lot of them are worth, you're not buying the land, you're not buying the agriculture production, you're buying the water rights, right? It's just like, oh, well, our expected value is 5 million for the water rights and negative a million for the farm, right? That's what we're selling for for. But if you're going to keep running the farm, you're not going for the highest and best use, so you've overpaid. And that's the problem. Yep. So do you speak Romanian? Anybody here? No. No. No. The thing too about this is, it may not be immediately obvious, milk is a commodity, right? You are producing a commodity and you have pretty significant fixed costs here, especially if you buy this thing with debt.

8:31The price of milk dairy moves around, which means there is, you know, much like oil, like there is a break-even price of milk for this farm, you know? And if the price of milk drops below a certain level, every gallon that you milk, you are losing money, but you also kind of can't stop because you can't just shoot all the cows in the head, right? So you've got to keep it a lot. You've got to keep it going potentially at negative margin because it's not easy to turn right back on when it becomes profitable. It's not an oil well where you just stop pumping and start pumping and turn off the cost.

9:03So I would want to understand sort of the dairy price versus EBITDA sensitivity curve and how that, you know, what is the range of dairy prices in which I'm making good money and what is the historical range of dairy prices and how much risk do I have? Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal.

9:45Sign up for a free live Q &A session on SBA loans at visocap.net, then click Zoom Sign Up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom Sign Up. Wait, wait, Mills, you did research on historical milk prices before the episode? Research is a loose term. You're pulling up charts, dude. That's preparation. I just did it in the last 30 seconds, but I might like this deal more than you think. Okay. So Mills, you got it on the screen for our YouTubers, but you got to describe it for our podcast people. What are we looking at here? It seems like there's seasonality in dairy prices.

10:26The prices start the year, and I don't know what this is. This is price paid to the producer. I don't know what the, it's euros per 100 kilograms, but let's just say regardless this to the unit of measure. It starts out the year at like, and this was in 2024, 46.5, and it ends the year at 54.6. But there's kind of a trend where prices are relatively flat throughout the year. And then in September, prices go up pretty significantly, like almost 20%, 10 to 20%. So what I noticed, Mills, about this chart, so there's three curves in this chart. The bottom curve is the average of dairy prices from 2020 to 2024.

11:09And it ranges between 42 and 47. Then the next curve is 2024's prices, which ranges between 46 and 54, significantly higher. And then there's 2025's prices, which the low end is 53. And it looks like if the trend holds, it will push north of 60. So what this tells you, and you could have probably guessed this when you realized that the dairy farm was for sale, you could probably, what this tells you is that dairy prices in Romania are at an all-time high, right? AKA profitability of this fixed cost leveraged commodity play is at an all-time high. Yep. So they would love to sell it to you right now.

11:48Yeah, because their fixed costs have probably stayed about the same, but because it's commodity, and this business is too small to really probably hedge, right? I mean, they're not buying commodity futures of EU milk and stuff like that. So they're going to ride the roller coaster, whatever it is. I worked for a couple of banks that had agricultural lending, and I would sit in loan committees and listen to the deals. I did see a few dairy farm deals. I retained absolutely zero information, unfortunately, because it's really its own unique sets of ratios and things that you look at. But this particular operation, this is very complex.

12:27This is a lot to run. It's not just the animal's husbandry or whatever you call it to take care of a herd like that and to milk them. But it's the growing of their own food. You're not purchasing hay. You're farming the hay. And this is just a really complex operation. It's probably like you hear farmers are exhausted because it's 24-7. It never ends. animals are, you know, need medical care or they're giving birth or whatever it may be. And yeah, they're probably, they're probably tired and they want to sell at a good time where milk prices are high, but you really need to know what you're doing to buy a business like this.

13:09So why is it being marketed on a website for U.S. business buyers? Can I ask that? Well, look at this, Michael. This website, there is all kinds of businesses in all kinds of different countries listed here.

13:30Is this a big chain or are they aggregating these? I don't know. Mergers Corp. I have never seen this. No, I haven't either. They're all on Merger Corp. There's some bangers in here we got to do because I really want to dig into the Japanese musician royalties rights. Yes. Wow. We got six months of content here. 50 year old Italian automotive manufacturing business. You can make parts for Ferraris in Italy. The European accredited Ferrari club in Italy. And also look at all these banking licenses. A lot of this we talked about certain things. Oh, there's a Ukrainian baking license. That's a good content right there.

14:16I'm cutting you guys off. I'm cutting you off. I'm going to stop sharing the stream. We need to get on the road. Okay. On that note, Heather, where are you on the cattle farm here? No, no, thank you. This is way over my head. Very, very complex operation. Thumbs down. uh i'm hard no here because you're also dealing with like you know mad cow disease i mean like anytime anything agricultural i mean you're like have to cull the herd if something comes through like there are so many this is so specialized you do not just cannonball into buying and running a dairy farm like you will kill all your cows and probably some people uh with your poison milk yeah go ahead mills and i'm gonna tell you why you guys are all wrong and this is your commodity exposed here at the commodities at an all-time high.

15:06Like you can't buy it on all-time high commodity prices. All right. Another thing that I like about this business in the face of so much animosity towards it is that right now globally, there is so much onshoring happening, right? Across kind of any industry, any vertical, because people are so concerned about tariffs and trade implications. Milk at the end of the day, rarely is going to be produced in Romania or produced in the U.S. and shipped to Romania. It stays close to home. It's refrigerated. There's a chain of custody. There's all kinds of things that really matter in this business. I think this is probably a really great, stable business.

15:47And I agree with Bill, there are a ton of risks. There's a ton of things that, but that's farming in general. That's just the nature of the game. Nowhere near this price. But I'm, I think this is fascinating. If, if I was, you know, independently wealthy and I didn't have any strings attached, you know, I didn't have a family. I didn't have, you know, other things going on. This would be a really cool business. I'm going to tell your wife that you're leaving her and the children to move to Romania and run a dairy farm. This is Mills midlife crisis. They're coming to Bill. I mean, they're going to, they're going to be there.

16:22This, how do you think we're going to run the farm? It's all the child labor. Right. There you go. All right. So here's why you guys are totally wrong. And this is an amazing deal for Mills. All right. What Mills needs to do is reach out, get the thing under LOI, and start the process of buying the thing. In parallel, you go to Netflix and you say, look at me. You want to reach the Gen Z, Gen X, South Carolina entrepreneurial. And Southern Cal. And Southern Cal too. guess who's going to watch this show also Heather and you've seen what's happened with Clarkson's farm you're just going to do it on steroids near a war zone and it's going to be so much better and you get this farm paid for by taking the$30 million production advance that you're going to get from Netflix to do the show to buy the farm and you get to farm for free and you get to be TV famous Michael needs to move to LA I've just decided yeah these ideas yeah you belong here as a promoter i think what great tv it will be when the romanian rogue guys show up with ak's to take your cows yes that's great content we didn't even talk about that this is right next to crimea we didn't even talk about that it's yeah all of the cows are slightly radioactive like this this this is between moldova and two parts of Ukraine.

17:47That's what's going on with Bromain. You guys can't see it, but I'm exiting out the tabs. I'm getting rid of all my research. I'm clearing out. I'm done. I just told you how to do this. Just go execute on the plan. We got this. I'll go with you to the meetings. I know a guy. You'll be his agent. I know a guy. All right. On that note, I think we will finish up this episode. What call to action do we have for people today? Should they our apps are getting weirder so if you like this stuff tweet us on x uh or go to acquanon.com and we're also trying these a little shorter or like 16 minutes today we're trying these like more rapid fire quick hitting ones so if you like this uh tweet us and tell us or if you'd rather us go deeper and longer like we have in the past we do that too let us know or send us a normal deal please or someone says you know mills can't keep doing this to us send us some normal deals.

18:45You guys are crazy. We're doing the Ferrari Club next week. Meanwhile, the next episode is going to be about Japanese music rights. So I'm in. Can't wait. All right. We will see you guys on the next episode of Acquisitions Anonymous.