Fleet Repair Company with intent to submit LOI

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by a searcher from Northwestern University - Kellogg School of Management
in Chicago, IL, USA

10mos ago

Fleet Repair Company with intent to submit LOI

Hi All, Currently looking at submitting an LOI this week on a Fleet and Heavy Equipment Repair facility in Michigan. Quick synopsis: Adv. Price: $3.5M (real estate optional at $2M) 2024 Rev: $2.8M (3% growth from previous year) 2024 EBITDA: $759k 2024 SDE: $993k Adjusted EBITDA post sale (my salary and salary increase for underpaid employee/relative): $743k Given the adjustment, the company is a bit overvalued, but would love feedback on if I am looking at this correctly. Current model with 87% debt and 5% seller financed isnt returning the most favorable DSCR. Any considerations or thoughts on how to structure the deal? The obvious would be more equity or a lower PP, but any other thoughts?

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reply by a searcher 10mos ago
from Texas Tech University in Houston, TX, USA

Hi Ray, you’re on the right track. The feedback you’ve received is on track and consistent: don’t overpay and don’t over-leverage, especially in a sub-$1M EBITDA business with some question marks around sustainability and add-backs.

reply by a searcher 10mos ago
from Northwestern University in Chicago, IL, USA

I listened to A.M. podcast on fleet repair rollups the other day. Sounded like two search partners acquired CRE at 5%, leveraging 504 and 100% seller financing on the operations of the business. Leveraging 504, I was under impression 10% down was the minimum. Pretty interesting strategy I thought. On another note, I am thinking the target CRE is overvalued too. 2 comparable commercial properties (both land only) come in at 4.47 acres, $1.1M, and the other 2.45 acres, $750k, vs the asking price of the target $2M on 2.12 acres (building included). Perhaps $1.2M on CRE and looking at 3.1x on the buyer adjusted EBITDA to get ENT Value. Very interesting on shifting much of the PP to CRE and lower PP on the business entity, so that's worth a thought.