Deal structure advice - self funded search fund
July 16, 2024
by a searcher from IESE Business School in Madrid, España
Hello Searchfunder community!
I am looking for advice to structure a deal. Characteristics:
- LOI to be signed soon
- Terms (in negotiation):
a) EV/Price: 8M; 4x EBITDA
b) Company has income of 5M and 2M EBITDA
c) 1.5M Earnout
d) 2M seller financing
e) Sellers willing to reinvest
f) Banks are willing to finance at least 50% of deal
Questions:
1. I am looking for advice regarding a deal structure different to classic search fund structure (25%, subject to IRR Investor's return...) that could maximize searcher % equity/ returns.
2. Ideas/ advice to structure the LOI
Thank you in advance
from The University of Chicago in Chicago, IL, USA
Seems like the deal is P=$8 M, $4.5 M Cash, $2 M Seller Note and $1.5 M Earnout. Cash is $4 M debt plus $500 k equity plus seller rollover. Am I correct?
I am guessing you are looking at a non-SBA, otherwise you would not have used the words "earnout". Assuming that, seems like this an asset intensive business.
Are you asking help structuring the capital stack between you and the investors? If so, that would have none/minimal impact on the LOI.
Happy t0 help.
from University of Notre Dame in New York, NY, USA