Input on deal structure -- specific deal

by a searcher

9 months ago

I'm looking at a company, where the retirement age owner has taken their eye off the ball in the past 1-2 years, which impacted profitability.  I believe it can be turned around based on my experience and the stable revenue.  Seller indicated their preference for a "revenue share" deal structure.  My concern is that the higher priority is increasing profit, so an earnout based on profitability seems more appropriate.  Another factor is the WC, particularly the Inventory.  What deal structure would you offer?  

	                      2021	          2022	2023 Projection
Sales	              5,015 	 4,790 	5070
COGS 	              3,428 	 3,190 	 3,568
	                     68.3%	         66.6%	70.3%
Gross Profit	      1,587 	 1,600 	 1,502
	                      31.6%	  33.4%	29.6%
Adj EBITDA	     420 	        298 	 80
	                     8.37%	        6.22%	1.58%


Balance Sheet
Assets###-###-#### ,400 (Inventory is 625, FFE is 450, AR is 425)
Liabilities###-###-#### 

2 likes
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9 comments

searcher from University of Miami

following

4 months ago | like reply | 0 likes

searcher from Bentley University

What has caused the erosion in Adj. EBITDA? I support the royalty on revenue or gross margin, as the seller will likely take the view or perception that EBITDA can be "spun" to an outcome though the business is growing.

9 months ago | like reply | 0 likes

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