What is usually the debt/equity ratio you see in SF acquisitions?

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January 10, 2020

by a searcher from London Business School in London, UK

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Reply by an investor
from INSEAD in Hermanus, 7200, South Africa
Here in South Africa it's odd to get much more than 1x Earnings if pure cash-flow lending, unless secured by property and other other assets. Really depends on the stability of cashflows, and security that can be provided. But in general, it's a bit more conservative out here.

So if you're paying 3x cashflow (EBITDA or otherwise), you're looking at max 33% debt if you don;t have security or very secure and contracted cashflows coming out of the underlying.
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Reply by a searcher
from Loyola University Maryland in Atlanta, GA, USA
It depends on factors such as cash flow, CAPEX needs, asset intensiveness, etc... but I have seen structures as aggressive as 20% equity / 80% debt on acquisition value. As far as debt/ebitda, again, it depends on above mentioned factors but I would personally not go above 2.5x debt / ebitda.
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