Financial driver evaluation

Member resources:

Frequent asked questions:

What is Searchfunder.com?

Searchfunder.com is an online community of searchers, investors, lenders, brokers and other professionals. Over 80% of those involved in searchfunds maintain a Searchfunder account to help them network, hire, and mentor others.

What are the benefits of membership?

In addition to accessing the most active online network of business buyers, Searchfunder licenses research that is simply not cost effective for individuals. Access over 15,000 industry reports and 50,000 transaction financials. You also get monthly credits for contact information for your company sourcing campaign with the option to purchase more at drastically discounted rates. Searchfunder has pre-purchased access from these data providers in order to empower individual buyers and to help searchers level the playing field versus private equity.

Do you have deals?

While we are primarily a buy-side network, we do have hundreds of brokers that regularly post deals to the community.

Can I find an internship on Searchfunder?

Absolutely! We have the industry's largest intern job board. If you are considering a search, the first step is to help another business buyer so you can hit the ground running.

What does it cost?

Searchfunder is a subscription service. We offer flexible monthly, annual and lifetime memberships.

Monthly

$79 / month

Annual

$19 / month

Lifetime

$432 / once

Those who maintain an account with us for over 4 continuous years are permanently added to the community without the need for a membership.

Do I need an MBA to join?

While a large number of our members come from dedicated programs at Harvard Business School, Stanford GSB, Chicago Booth, and other top programs, searching is no longer reserved for the elite. With the current abundance of dry powder in private equity, and an increasing number of business owners reaching retirement age, good deals rarely go unfunded.

Post a question, deal, job, etc...

Make a post...

Complete registration to post.

by a searcher from IE Business School
in Lima, Perú

5yrs ago

Financial driver evaluation

Hi all! Just want to understand when investors are open to undertake an acquisition laying an EBITDA below 12-14% (under what is normally expected at purchase in SF model) but in which there are some other interesting opportunities upon capital structuring or some operative improvement. What would you consider the most for analyzing this kind of deal?

1 Like

108 Views

reply by an intermediary 5yrs ago
from The University of Chicago in Chicago, IL, USA

I am not sure if I understand the question. I think you are asking if a business with EBITDA <12% is a good business.

I consider EBITDA margin as a "guideline", not as a "financial driver". Anyone who teaches otherwise is missing the fundamentals of finance.

Example: A hawker goes to the bazar and buys fruits for 100. He sells them off at the end of the day nets 101. A profit margin of 1%. He repeats this every day. At the end of the year, he has his original investment of 100 plus profit of 365. His margin on sales is 1%, but ROI is 365%. Is this business bad or good?

I had heard this from my father at age 10 but did not appreciate it even though I had MBA (U of C) and Sr. management experience with a Fortune 500. It was after 10 years as an M&A Intermediary and teaching at Kellogg that I began to appreciate the wisdom of what my father said. I now analyze the fundamental "business model" of a business and not any specific metric.

Just like low margin business can be a good business, the opposite is also true. That is, a high margin business sometimes is more risky.

reply by a searcher 5yrs ago
from National University of Ireland, Galway in Seattle, WA, USA

That is our target area. I think the most important consideration is what are you bring to the situation that will change the circumstances that caused the low EBITDA. Note that sometimes low EBITDA is deliberate. A low debt business with high working capital turns can be fully cash viable for years at say 8% EBITDA. The goal in those cases is to build market share as the value repository. A subsequence earnings focused strategy is simply remixing the allocation of expenses to reprioritize margin. However to do that IMO you have to understand the sector. It is not simple financial engineering with no market or customer understanding. Because so many PE investors are leverage focused and need higher EBITDAs it should be possible to buy "low" performers for a discount relative to the realizable performance within a reasonable period, say 5 years.. You need more cash but the ROI could be greater. and risk lower..