Last year I came up with the thesis that most overleveraged aggregators would default in their covenants in###-###-#### With a 1 to 3 equity-to-debt ratio, it is just not feasible to buy e-commerce brands and operate them with enough cash flow.

In 2023, we closed on 3 transactions and bought over $15MM in revenue with only $100,000 in equity for the goodwill, two transactions have been $1 for the equity. EBITDA post-integration will be $600K,

At Inversal we plan to target the bigger aggregators in 2024 and provide a solution to their first lien lenders of at least 50 cents on the dollar, once the businesses have a cleaner balance sheet and 50% lower operational expenses from us, they become solvent and quite profitable.

Example of the latest transaction:
$4.4MM revenue, $625k CM3, $750k inventory. $1 for the equity and $750k for the inventory, wiping all the first lien lender debt at 50 cents on the dollar.

All these transactions have been self-financed via previous exit by myself and now we are looking for institutional/family office capital to tackle the bigger transactions.

Example of a bigger transaction:
$50MM revenue
$8MM cm3 (enterprise value $20MM max at 2.5x)
$6MM opex
BS: $20MM equity raised $40MM debt at 15%
$-6MM interest
$-4MM cashflow (facility due in###-###-#### )

Proposed buyout at $20MM with $10MM cash and $10MM debt rollover with an OPEX reduction from $6MM to $3MM, EBITDA of $5MM

Let me know if someone is interested in this space, or knows family offices that are happy to explore distressed/turnaround.