How to finance Asset heavy acquisition?

January 29, 2024

by a searcher from Griffith University in Brisbane QLD, Australia

I have a great deal (see below), but I am having a hard time getting the cash flow to cover debt services because the business is very asset heavy. How would you suggest I try to structure the deal?

Asking price - $26.6M
EBITDA - $4.8M

Breakdown of asking price:
- $7.0M business value including assets (1.46x multiple), includes a rental fleet at a depreciated value of $12.6M.

$13.2M New stock.
$2.4M Used stock.
- $4M Parts and accessories.
Other details:
- Business operating 27 years.
- Steady sales with growth of approx 10% every year for the past 10 years.
- Business owns 60% of the market, with only 2 other competitors.
- Business owner will to stay on for 12 months.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Hello Travis. Happy to have a conversation and see if there is a way to structure a deal. However, I see this a lot in asset heavy deals where the ask price is high due to the amount of equipment that exists versus what cash flow is actually produced. A lot of times when you factor in future CAPEX to the deal, it lessens the cash flow even more. Many times we find the ask prices, regardless of how much equipment exists, just is not supported by the cash flow. If not it is going to be hard to get a lender to do it, even an asset based lender. Again, happy to look at the package and provide more direct feedback on what is realistic. I just want to be up front regarding what we see with many equipment heavy businesses. You can reach me here or directly at redacted Good luck.

Reply by a searcher
from North Carolina State University in Pennsylvania, USA

Navigating the financing challenges posed by an asset-heavy acquisition, where the asking price is $26.6M and EBITDA stands at $4.8M, requires strategic structuring. With the breakdown of the asking price, including $7.0M for the business value (at a 1.46x multiple), $13.2M for new stock, $2.4M for used stock, and $4M for parts and accessories, the substantial investment needs careful consideration. Despite the business's robust 27-year history, steady sales growth, and a significant market share of 60%, aligning cash flow with debt service becomes crucial. Exploring innovative financing options, such as leveraging assets or negotiating favorable terms with the seller, could be instrumental in securing this promising deal.

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