I have a deal I am doing some DD on, and here are some details.
- 3 years Avg Rev is ~$1,5M
- 3 years Avg SDE is $360k
- Seller looking to get for 0.78x the 3 y average Rev
- Seller has agreed to hold 40% of the deal
- Sale includes FF&E, but with a caveat
- Seller would like the buyer to assume loans they currently have on FF&E
- FF&E valued at ~400k and loan payoff is ~300k
- Rev is fairly cyclical and tied to the RE market, so April thru October is "peak season."
- Company has about ~12 employees FT and seasonal
Should I assume the loans or ask for a price concession since the business assets are levered?
How would you go about doing the deal?
Has anyone diligenced a residential moving company?
by a searcher from Drexel University - Bennett S. LeBow College of Business
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moving companies, there isn’t much repeat business so the value of the goodwill of the business is pretty minimal. Revenue valuations should not even be in discuss here. Should all be SDE. This feels very expensive to me.
Maybe they have something truly special about them (e.g. long contracts with specific building such that they are the only company moving in/out, or 50%+ of their revenues being from storage which would have a much higher multiple), but you didn’t mention that they do.
You also mention 3-yr averages. I hope that calculation is in your favor given the price sounds much too high here.
Him giving a 40% seller note is standard here, the price is not.
These companies don’t trade for much because of the seasonality, cyclicality, labor transience, 1-off-non-recurring purchasing, and no barriers to entry.