Financing a Company Purchase - Advice needed
Discussion
Okay, I posted on this topic a year ago but thought I'd start a fresh thread as I'm after some solid advice.
I'm looking at purchasing a business in my industry (highly specific) due to owners impending retirement and need some finance and possible acquisition advice.
I'll put the figures in US$'s but they trade in Sterling due to being UK based (but global sales).
The business has revenue of circa $7.5m and a solid 10% ebitda (my career has been spend improving ebitda figures so confident this can be doubled).
The asking price is 6 x ebitda so around $4.5m. There's fixed assets including property and SAV of around $1m. I can raise $1.5m so looking to finance the remaining $4m.
I have several investors who'd like a stake plus some former contacts at P/E firms interested however they all require either too much equity or a return circa 25%
I'm thinking some form of banking loan would be best but have no experience with UK banks in this regard so not sure of the debt/equity level they'd be after.
I do appreciate any suggestions.
I'm looking at purchasing a business in my industry (highly specific) due to owners impending retirement and need some finance and possible acquisition advice.
I'll put the figures in US$'s but they trade in Sterling due to being UK based (but global sales).
The business has revenue of circa $7.5m and a solid 10% ebitda (my career has been spend improving ebitda figures so confident this can be doubled).
The asking price is 6 x ebitda so around $4.5m. There's fixed assets including property and SAV of around $1m. I can raise $1.5m so looking to finance the remaining $4m.
I have several investors who'd like a stake plus some former contacts at P/E firms interested however they all require either too much equity or a return circa 25%
I'm thinking some form of banking loan would be best but have no experience with UK banks in this regard so not sure of the debt/equity level they'd be after.
I do appreciate any suggestions.
In terms of raising funds against the trading performance of the business your best bet would be to talk to the businesses current bank - if the business has a strong track record and a good relationship with the bank it will certainly help.
Looking for $3m against editda of $750k is a 4x multiple which is pretty strong in the current sme marketplace. I don't think one of the main high street banks would get to that level. I think 2 to 2.5 times is more likely.
I think your best bet would be some form of asset based borrowing - say 70% LTV against the property gives $700k, 50% against stock gives $500k and c50% against trade debtors (not sure how big these are) plus maybe 1.5x editda as a cash flow/trading loan.
I work in the industry and that is how I would look at the proposal if it came across my desk.
Pm me if you have any questions
Looking for $3m against editda of $750k is a 4x multiple which is pretty strong in the current sme marketplace. I don't think one of the main high street banks would get to that level. I think 2 to 2.5 times is more likely.
I think your best bet would be some form of asset based borrowing - say 70% LTV against the property gives $700k, 50% against stock gives $500k and c50% against trade debtors (not sure how big these are) plus maybe 1.5x editda as a cash flow/trading loan.
I work in the industry and that is how I would look at the proposal if it came across my desk.
Pm me if you have any questions
Asset based lending may suit depending on the type of business. With most ABL lenders, a 'rough' idea would be c30 percent of stock value at cost available, and receivables finance of around 85 percent of debts less than 120 days old.
Property is tricky at present and is p and m finance. Many lenders looking to reduce commercial property loan values in favour of stock, particularly if the building is long established and perculiar to the business or sector. Can also be the same for p and m, dependant on the level of competition available and the market sector performance, some very expensive kit can have limited financing availability. But stock and debtor finnsce is available from the majority of mainstream lenders and competition can be fierce, so you can get some decent deals.
From the basic details you mention regarding performance, you should be able to source suitable financing relatively easily, providing there are no major contractual or factor ability issues with the business. If you could give an idea of sector I could give you a bit of a better idea How you may fair with ABL approach.
Property is tricky at present and is p and m finance. Many lenders looking to reduce commercial property loan values in favour of stock, particularly if the building is long established and perculiar to the business or sector. Can also be the same for p and m, dependant on the level of competition available and the market sector performance, some very expensive kit can have limited financing availability. But stock and debtor finnsce is available from the majority of mainstream lenders and competition can be fierce, so you can get some decent deals.
From the basic details you mention regarding performance, you should be able to source suitable financing relatively easily, providing there are no major contractual or factor ability issues with the business. If you could give an idea of sector I could give you a bit of a better idea How you may fair with ABL approach.
Asset based lending may suit depending on the type of business. With most ABL lenders, a 'rough' idea would be c30 percent of stock value at cost available, and receivables finance of around 85 percent of debts less than 120 days old.
Property is tricky at present and is p and m finance. Many lenders looking to reduce commercial property loan values in favour of stock, particularly if the building is long established and perculiar to the business or sector. Can also be the same for p and m, dependant on the level of competition available and the market sector performance, some very expensive kit can have limited financing availability. But stock and debtor finnsce is available from the majority of mainstream lenders and competition can be fierce, so you can get some decent deals.
From the basic details you mention regarding performance, you should be able to source suitable financing relatively easily, providing there are no major contractual or factor ability issues with the business. If you could give an idea of sector I could give you a bit of a better idea How you may fair with ABL approach.
Property is tricky at present and is p and m finance. Many lenders looking to reduce commercial property loan values in favour of stock, particularly if the building is long established and perculiar to the business or sector. Can also be the same for p and m, dependant on the level of competition available and the market sector performance, some very expensive kit can have limited financing availability. But stock and debtor finnsce is available from the majority of mainstream lenders and competition can be fierce, so you can get some decent deals.
From the basic details you mention regarding performance, you should be able to source suitable financing relatively easily, providing there are no major contractual or factor ability issues with the business. If you could give an idea of sector I could give you a bit of a better idea How you may fair with ABL approach.
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