I'm early in diligence (pre-LOI) with a contractor with 90% revenue coming from public bids. Appx $10M top line with 10-13% adjusted EBITDA margins. A balance sheet from within the last 3 months shows the company holding over $1.8M in cash. This seems high to me, but I'm trying to dig in to determine if that is a reasonable/expected need going forward, as obviously this would dramatically impact the ability to finance the deal.
Specifically, I'm wondering if anyone has experience in determining a conservative amount of operating capital required for companies operating in the public bid market and if so, how I should be thinking about and calculating this (ie-what variables go into this analysis?)
Thanks!
Matt
Operating capital for Contractor focused on public bid market
by a searcher from Georgetown University
More on Searchfunder
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.
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.
1) Brad Hettich comment on bonding capital,
2) seller just keeps cash in the company,
3) Billing in Excess of Cost i.e. advance payment. If so, you should get such cash,