Price/Multiple Feedback on Potential Acquisition

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August 16, 2023

by a searcher from The University of Michigan - Stephen M. Ross School of Business in Chicago, IL, USA

Looking for feedback on an initial offer price for an LOI on an acquisition I am currently evaluating. It's a 5 year old online education business posting $2M in SDE on $3.2M in sales in 2022 as well as in the TTM. Has $6k AOV and $10k LTV, multiple recurring revenue streams, and a sizeable FB group and email list. Per the owner/broker, the business is fully staffed with documented SOPs in place (need to vet/review). The asking price is $6.65M. What's a reasonable initial starting offer?

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Reply by a searcher
from Harvard University in San Francisco, CA, USA
^redacted‌ - What's the growth rate of the business? McKinsey published a great article about the rule of 40 in search/ PE circles and its impact on valuation. https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/private-equity-investments-in-tech-services-three-considerations?cid=soc-web
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Reply by a professional
from Oregon State University in Kuna, ID, USA
^redacted‌- Check out the 611 NAICS series using DealStats, from BVR. We have over 400 transactions related to education services. Click on the BVR Transactions link at the top of the Searchfunder platform and IM me if you need any help.

Here is a link to NAICS 611. In order for transactions comps to appear, you'll need to enter a 6 digit code.

https://www.searchfunder.com/bvr/sector/23
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