How do you calculate in the premises?

by a searcher from Helsinki University of Technology

3 years ago

if the basic rule is to pay 3-5 X EBITDA, how does this take into account the premises? Are they included in this price or not? Or do you calculate those on top of the price? This is currently very confusing to me. The idea is not to pay anything for the machines that produce the EBITDA, but what about the premises and the land? Any ideas?

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investor from University of Pennsylvania - The Wharton School

Agree with Neil's and others' comments. And am wondering about the statement that "the idea is not to pay anything for the machines that produce the EBITDA." If the value of the company derives from the assets generating the cashflow stream you're acquiring, how would you get those assets (in this case machines apparently) "for free" or exclude them from the transaction? Not trying to be adversarial here, just looking to help clear up possible misconceptions about valuation.

3 years ago | like reply | 1 like

searcher from University of Toledo

I would add, consider acquiring the premises as a matter of collateral for the acquiring of the going concern. It helps when attracting acquisition financing and gives your investor(s) a collateralized object in case the business does not perform.

3 years ago | like reply | 1 like

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