Is my bid below market rates and not competitive?
June 17, 2021
by a searcher in Florida, USA
Working on a deal now valued at 4.5x -5x which we think is within market range (industry comps are 4-6x).
However when we look at purchase price allocation across the balance sheet, the write up of PP&E creates significant negative goodwill...thus the purchase price is lower than the FMV of the assets + equity of the company.
Does this suggest that our EBITDA multiple and corresponding valuation is below market and thus not competitive?
from Indiana University at Bloomington in Chicago, IL, USA
1) Is the deal being pushed through a competitive process (i.e. more than just you are bidding on the company)?
2) Do you know if strategics or private equity (for add-ons) are competing with you?
3) Is this deal represented by an intermediary and is that intermediary quality?
4) The industry the business competes in?
5) Size of the business on EBITDA or SDE terms (e.g. sub or above $1M)?
6) Is the seller really willing to sell? (This has been our biggest challenge).
7) How complicated is your transaction structure?
8) Geography (e.g. near a desirable place to live or in the boonies)?
Generally, I'm seeing first time buyers in standard search industries (e.g. niche distribution or asset-lite manufacturing) trading around 5x TTM or 2020 sub $1M in EBITDA when brokers are involved. Assuming topline growth is high single digits and EBITDA margins around 20%. I would say your non-anchored 4.5x multiple seems like a good starting place based on the limited info provided.
I'm curious on what others are seeing on winning bid pricing.
Best of luck.
from The College of New Jersey in La Verne, CA 91750, USA