When real estate accounts for 50-70% of ebidta, how do you price it?
November 05, 2022
by a searcher from Georgia State University in Boston, MA, USA
A business I am looking at is priced off the ebidta, but the real estate is absolutely necessary for the business and accounts for 50-70% of the cash flow. After real estate payments, the remaining cash would be completely sucked up by the loan payment for the business itself. For contexts, everything about the business itself is good: great employees, organization, environmental, very well established, awards, exc, only downside is it’s not pandemic resistance. Please let me know how you’d approach the pricing? Thanks!
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
If you can acquire the real estate with the business, it does give you an advantage if you are looking at SBA 7A financing. First, if the real estate purchase is more than the business purchase, then you can secure a 25-year amortization on the entire debt. If the business purchase is more than the real estate purchase, then you can get a blended amortization where they assigned 10 years to the business debt and 25 years to the real estate debt, and you end up with an amortization between 10 and 17.5 years. This will give you a lower payment then financing both separately as you are extending out the business acquisition debt. Also, the involvement of real estate typically makes lenders more excited about the transaction.
If you need help trying to value the business, we would be more than happy to run some analysis for you. We do this for free for our clients. We would just need to see the CIM and/or any financials you have received on the business. You can reach me directly at anytime at redacted Thank you and good luck.
from University of Chicago in Chicago, IL, USA