HOW DO YOU CALCULATE IN THE PREMISES?
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?
If you don't want the real estate but still want the business, your best bet is to discuss with the seller to see if they'd be interested in selling the real estate separately. Alternatively, I've been involved in deals where we hired a broker to find a buyer for the real estate and performed a sale-leaseback, thus only having to own the real estate temporarily. It's messy, but if you really want that business then it is doable.
This adjustment will allow a more accurate basis for EBITDA & resulting business value. This will then allow you/investors to determine value of the real estate and make decisions on whether to purchase, exclude from sales and rent, or look for alternative options.
E.G. they bought a business for $1M (operations of a particular site + land) and managed to mortgage the land for more than $1M.
Though more often, you just buy the business and sign a very long lease contract (10+ years) with the seller for the land. You obviously decrease (adjust down) EBITDA for the lease payment.