SELF-FUNDED DEAL: AVERAGE IRR FOR INVESTORS

Hi all,

Im currently developing my investor network for a potential acquisition in the manufacturing space in Europe, via a self-funded search. Target company ranges 300k to 700k EBITDA with pretty stable earnings. Acquisition is intended to be leveraged, with roughly ~50% bank debt, ~20% seller financing, ~30% equity.

In talks with investors I have presented an initial Memorandum offering IRRs of 8-10% with preferred return, given the average returns on senior debt and seller notes I was aware of. This IRR range has been too low for many investors (most not savvy in this type of investment) at first impression - I was being asked how this could be so low if, for instance, PE returns with lower risk can range 12-20% IRRs. In general, perception was that the risk was too high for such a return.

Would love to get your experience/ thoughts on the market IRR ranges for this investment type, to update or confirm my pitch to investors.
Thank you.



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