Approaches to valuing post-acquisition bolt-ons

October 03, 2024

by an investor in Boston, MA, USA

For Searchers who successfully acquired a business and proceeded to acquire bolt-ons, I’m curious to know whether or not your valuation methodology and financing structure changed.
The initial acquisition’s valuation was limited by financing structure and expected investor returns e.g. ≤4x EBITDA in a self-funded deal with SBA 7(a) debt, investor equity and a seller note. But for subsequent acquisitions, were you willing to pay more, finance it differently using the current business’ cash vs. raising more equity/debt, increase the seller note or employ earnouts, involve the seller post-acquisition differently, etc.?

Reply by a professional
from University at Albany, State University of New York in Delray Beach, FL, USA

Dave, we generally finance second and subsequent acquisitions very differently than the first. It's incrementally easier to do deals after the first, but it also doesn't mean we'd be willing to pay a higher multiple just to get a deal done. Each deal is viewed with the same lens, whether it's the first or tenth. Reached out to discuss if you want.

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