Hi,

I'm looking at a niche construction deal right now, at the point of negotiating the LOI.

The company had a pretty big swing in EBITDA from 2022 to###-###-#### barely profitable in 2022 and hugely profitable in###-###-#### on slightly higher 2023 revenue. The seller has chalked that up to fluctuations in raw material prices. Obviously, if levered up with SBA debt, a repeat of 2022 could be very problematic.

I have a masters degree in finance, so I've studied hedging, but I've never actually done it in practice. Is there a cost effective way (futures contracts on lumber, etc.) to hedge the majority of the risk away? I know I will be giving up upside to get a low-cost hedge, but I'm ok with that if I can take away the risk of an unfavorable fluctuation causing a default.

I'd love to chat with anyone who has experience in hedging construction supplies or any other commodity.