High Inventory Buisness

searcher profile

August 14, 2023

by a searcher from Western Governors University in Atlanta, GA, USA

Hey all -

Does anyone have any experience with super-high inventory deals? I'm looking at an equipment repair company on track to do $1mm in EBITDA this year but $3.5mm in inventory. Inventory growth has grown in line with revenues over the last five years and is eating much/most of the biz cash.

I like the biz - I'm thinking about doing a purchase option where I pay a multiple of cash + buy the inventory as I use it for a higher purchase price than if I did an all-cash deal. I want to do that without creating a new legal structure that will blow everyone's brains up.

Does anyone have any experience with that and talking a seller through that? I appreciate any advice you can provide.

Thanks!

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commentor profile
Reply by a searcher
in United States
I’ve heard about deals where you “buy the inventory as you go.” It didn’t sound too complicated. But I thing ^redacted‌ is asking the right question: why is inventory so high? If you need this much ongoing inventory, that’s a big investment that will make it difficult to grow.
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Reply by a lender
from California State University, Sacramento in Seattle, WA, USA
There are different types of lenders. If you’re working with a cashflow lender, like me, the historic DSC is still going to have to support the price. Sometimes you’re better with an abl lenser if you need to afford extra inventory that might have different metrics than historic cashflow.
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