Douglas Dynamics Plows Ahead with an IPO

Founded more than 50 years ago, Douglas has built a solid business, which has control over half the snow and ice control equipment market. For the first nine months of 2009, net sales came to $125.2 million and adjusted EBITDA was a hefty $28 million. True, sales were off about 5.6%, but this was primarily due to the recession. The top-line should rise again as there will be a need to eventually replace aging equipment.

Despite all this, the fact remains that Douglas has some key advantages. First of all, the company has created a highly efficient manufacturing system, which keeps costs low but also results in high quality. Part of this is due to a focus on so-called lean manufacturing principles, which means higher variable costs and a flexible workforce. There is also the ability to allow for custom-designed mounts, which makes it possible for snowplows to be available on a variety of light truck models and brands.

In terms of distribution, Douglas has a comprehensive footprint. In all, there are 720 truck equipment distributors and the average customer lifespan is 15 years.

AK Steel Holding (AKS) spun-off Douglas to a private equity firm, Aurora Capital Group, back in 2004. So, the IPO should represent a nice gain on the deal as well as help to pay down debt.

The lead underwriters on the offering include Credit Suisse (CS) and Oppenheimer & Co.

Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.