6-7x for a Self-funded Search Deal?

by a searcher

6 months ago

Looking at a business with $3M revenue and ~$750K in EBITDA. Seller wants ~7x. The business is entirely contracted and recurring revenue, a proprietary deal, and the company has grown consistently and steadily every year for the past 7 (including the COVID years). Seems very scalable with several opportunities for growth and strong fixed cost leverage as the topline grows. In traditional search, this seems like it might work. 

Does anyone have perspective on doing a self-funded search deal like this? 

Pretty rich multiple, but also a great business. Wondering if there's a thoughtful way to do it with seller financing, larger equity check than a typical self-funded deal, and potentially some equity rollover. May be just too high of a multiple for the size of business though.

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searcher from University of Melbourne

Hi , how did this deal end up going? Agreed with the logic of Arthur’s approach above.

3 weeks ago | like reply | 0 likes

searcher from University of California, Los Angeles - UCLA Anderson School of Management

You will most likely not find a bank willing to provide a CF loan on a company this small, and it sounds like the kind of business that won't have enough tangible assets to support an ABL loan. If you are willing to provide a PG you could get an SBA loan, and then backfill with as much seller notes as you can get, plus seller rollover, plus your equity check. A lot will depend on how much cash the seller wants at closing.

4 weeks ago | like reply | 0 likes

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