Valuation of a manufacturing cie @ Assets value or @ EBITDA multiple?

by a searcher from Université de Sherbrooke

1 month ago

I'm looking at acquiring a health supplement manufacturing company. 

The company has 3.2M$ worth of assets but generates only 600K EBITDA  / year.  The company operates at roughly 15% its production capacity right now.

The seller values his company at 3.8M$, which is value of assets + some intangibles (IP, etc.)

Is valuation @ Assets value the right way to value a manufacturing company?
> If so, should I pay for 100% of the evaluator's valuation, or lower?

Should I value @EBITDA multiple ?
> If so, what multiple should I benchmark on?

Thanks!

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20 comments

intermediary from Rochester Institute of Technology

My take here is the following: If he can really sell the equipment for $3.2M, that is his floor, he has no reason to sell you for less than that. So now the question is, why is he working at 15% capacity? Was he ever at 80% or more? When was that? What caused the slide? Are they producing white label products for other or have their own brand?Questions like that will give you an idea what happened and if you can possibly get back to capacity. But I suspect that supplements are quite saturated market.

3 weeks ago | like reply | 0 likes

searcher from Cornell University

6.3x is a big price to pay for a very small business, unless you have new business to bring to the company right now. The owner should try and sell the hard assets on the open equipment market to get his price. My bet is that they will not bring $3.2MM in net cash. My 10 cents. Thanks.

1 month ago | like reply | 1 like

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