Looking to get some thoughts on an acquisition before I move forward. Here is a quick summary of the main points:

  • 1) 35 years old service business that's owned by two owners. One owner wants to sell and retire and the other would prefer to stay and plan for an exit/retirement within 5 years or so. Sellers are open to financing up to 50% of the price since the seller will stay on for at least 5 years as an employee.

  • 2) Is it a good idea to keep the seller as a full-time employee post acquisition? He was hinting about getting $150k in salary. SDE is around $450k after paying that $150k salary. Thinking of offering $1.2 million which is a bit less than 3x multiple of SDE. My feeling is that they'll probably accept the offer since one of the owners really wants to retire and move out of state.

  • 3) Per new SBA rules, this will have to be structured as a partial buy-out. The seller will need to have some equity in the new entity in order to work as an employee post acquisition. I can give him 5% or so just to satisfy this requirement.

Overall, I'm thinking this could be a great first acquisition opportunity for me. My risk is mitigated with the big portion of seller financing and I have the seller working full time to help continue running the business for a few years.

What am I missing here? I appreciate any thoughts or ideas on this.