Equipment leasing company valuation

March 09, 2024

by an investor from Texas Tech University in Ann Arbor, MI, USA

Would anyone have experience with valuation of equipment leasing/financing companies? What are the things to look for evaluating companies in this space?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

^redacted‌ thank you for mentioned me on this one. This can be a very challenging space to do an acquisition in. This is due to heavy capital cost in acquiring this type of business. Even if the business has strong adjusted EBITDA, you need to take into account future CAPEX as these are very capital intensive businesses. The business needs to produce sufficient cash flow to support the acquisition even after future CAPEX is included. This will also require a thorough analysis of the existing fleet of equipment and remaining useful life of that equipment.

Just because the equipment might value out at "x" dollars, if there is not enough cash flow from the business to maintain that level of equipment, then there is no value to the business itself. You would be buying a losing business if you paid "x" for the equipment.

Happy to discuss in more detail or help you look at a specific opportunity from a lending perspective. You can reach me at redacted

Reply by a searcher
from Concordia University in Dubai - United Arab Emirates

Depends on the type of equipment you are leasing. Heavy machinery like excavators and cranes etc or smaller tools like drills, compressors etc. In the end, you need to know if the company bought the equipment or leased it themselves from OEM. Check how long each has been operating (mileage, years in operation etc.). You can get the serial number and have a chat with the OEM to see lifespan of such equipment and the mainenance cost involved. Value them against buying newer equipment. The idea behind someone leasing instead of buying is they don't take care of maintenance and can get the newest equipment on the market (with no overhead cost). It's a tough buiness but there are ways to make it work all depending on the price you pay and the client base they have.

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