How would you value & structure this deal?

by a searcher

1 month ago

Well established company. Margins were negatively impacted by COGS in '22.  TTM appears to show a bounce back and growth from added bandwidth.  Recent impact makes bank financing a challenge.  

Seller is willing to consider a down payment + earnout.  

                       ###-###-#### ###-###-#### TTM                     2023p    2024p    2025p    2026p
Revenue###-###-#### ###-###-#### ###-###-####                          ###-###-#### ###-###-#### ###-###-#### 
Margin###-###-#### ###-###-#### ###-###-####                      ###-###-#### ###-###-#### 3990
Margin %       34%      37%     26%      35%                      36%        36%       38%        39% 
Adj EBITDA###-###-#### ###-###-#### 900                     ###-###-#### ###-###-#### 1.780

Major Balance Sheet Items
AR###-###-#### 900
Inventory###-###-#### 

How would you value and structure using this information at this time?

1 like
324 views
40 comments

searcher from Symbiosis International University

Thank you ^Searchfunder member‌ for the tag. 10% down and seller finance with possible refinance in year 2 years. Projection is baseless so is TTM. Misconception that TTM means anything: it does not because you have no reference of previous TTM. So I encourage to steer away from TTM and keep it to earn out if at all required. On a side note, reach out to your bank and get a feedback if a bank sounds favourable on this deal then that is your best answer as lot of metrics are missing in your question so our answers here will be half hearted based on that.

1 month ago | like reply | 0 likes

professional from University of New Haven - College of Business

Thanks for the tag Luke - my first instinct is to value the company and then strucutre the deal. First question is why did Gross Margin change so much - need to understand reasons as revenues did not change materially over the 3 historical years. The reason for this is critical - can it happen again. Of course industry would assist immensely in this quest. I have not seen a response to this. It appears to be a distribution company but could also be a light manufacturing/assembly company. I am leaning towards the latter.

Understanding competitve dynamis is also important who are the competitors - local or ?
No mention of owner comp or adjustments to the income stream
What about CapX - again industry infor is critical.

Emphasis first on what is the price I am willing to pay, next structure...FWIW

1 month ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Self Funded Acquisition: A few Things I Learned

What are market terms for Seller Notes?

Examples of self-funded searcher websites

Investor Looking for Self-Funded Searchers Seeking Equity

How to spot FAKE EBITDA, without spending a nickel on due diligence...

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.