Acquisition Entrepreneurship: Debt and Investing (With Basic Modeling Tool)

July 31, 2019

by a searcher from Washington University in St. Louis - Olin Business School in St. Louis, MO, USA

I just wanted to share a couple articles I've published this month in hopes it may help.

1. Inc: What's the Right Amount of Leverage for a Deal?
https://www.inc.com/young-entrepreneur-council/whats-right-amount-of-leverage-for-a-deal.html

A brief overview of the biggest criticism I get for writing Buy Then Build and what the empirical evidence suggests the "right" answer is--as well as how to justify different, subjective answers (complete with basic modeling tool)

2. On SCORE: Is Acquisition Entrepreneurship Right for You?
https://www.score.org/blog/what-acquisition-entrepreneurship-and-it-right-you

A little more 101 here but emphasizes the intersection of hustle and caution that we all try to balance and having to think like a CEO during the search process.

Enjoy! Please share feedback from your own experience!

Reply by a searcher
from Harvard University in San Francisco, CA, USA

Walker, thanks for sharing. I really liked the first article. Can you help me understand how to interpret the graph in the sample spreadsheet? Is the implication that the optimal amount of leverage is found where the lines intersect? It is confusing to have the ROIC and SDE % shown together like that, as their combination/interaction/relation to the other doesn't provide a meaningful conclusion. Thanks again for posting and contributing to the community and discussion.

Reply by a searcher
from United States Military Academy in Houston, TX, USA

Thanks for sharing and that's very kind of you to allow others to access your spreadsheet. I have no doubt that you're already aware of this, but I would caution others to not ignore the ITDA part of EBITDA by assuming that EBITDA is a good estimate for cash available. Those are real costs (Depreciation being a good estimation for CAPEX) that will affect your ability to pay your loan payment. Thanks again!

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