How to buy an inventory heavy cyclical business?

Two thoughts here: 1) in the past when I’ve evaluated asset-intensive businesses, you’ll want to pay much more attention to valuation based on book value (vs. multiple of EBITDA), and ROIC. This will give you a better sense of the businesses earning power based on its assets at any given time, and determine how consistent these returns are when reinvesting into assets in the future. 2) Structurally, you’ll want to ensure your liabilities are more closely aligned with your asset base. This probably means instead of term loans backed by the cash flows of the business, you are safer with some type of asset backed facility, like an ABL facility. In this way, when drawing down inventory, your borrowing base will decrease, but you should be able to pay down the facility with cash generated. Reverse occurs when you are investing in inventory, so you can finance that investment with the expanding facility

Thanks for the tag Luke! I bought a cyclical/seasonal/inventory heavy business. I'd be careful trying to solve with structure problems that are best solved with careful diligence and appropriate pricing. In my case, I saw huge opportunities for better cash conversion and immediate growth that would make an acquisition with an attractive purchase price a no brainer. As has been oft repeated here and elsewhere, make a clean break with the seller with no upside participation on their end. Keep the relationship friendly but they aren't your partner in the future of the company.