Working inflated inventory value into offer. Looking for solutions.

by a searcher from University of Pennsylvania - Philadelphia

2 years ago

I am looking for guidance on structuring a commission on an elevated inventory level on a potential acquisition target. 

I am currently working a deal that has a large amount of inventory. Currently, I am not certain what percentage of the inventory is useful and could be sold in the first 90 days. An inventory audit will be part of the diligence process, but I need to reach an agreement before. 
Has anyone used a type of commission or another structure to not pay for the initial amount of inventory and pay the sellers once I sell the inventory post-acquisition? 

1 like
75 views
7 comments

intermediary from Arizona State University

Depends on the type of inventory. You could simply consign the excess and pay the seller as you sell it.

1 year ago | like reply | 0 likes

searcher from Butler University

I had two deals where we disagreed with the seller regarding slow moving inventory. In both cases we agreed to not value the inventory for our deal, but keep it on as consignment for a year. It was a tracking issue, but anything that sold from the list was then paid out to the seller. I think less than 10% of that inventory was sold. If the seller is confident the inventory is good they should agree to this structure. If they push back really hard they know it’s not good.

2 years ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.