Add-on opportunity bigger than platform

searcher profile

June 16, 2024

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Los Angeles, CA, USA

I am evaluating an acquisition opportunity/add-on bigger than the original platform acquisition from a revenue and EBITDA perspective. The potential acquisition would make sense strategically from a revenue growth and market positioning perspective. Some (limited??) operational efficiencies would be gained, but that is yet to be determined.

The combined entity would have revenues greater than $10MM and EBITDA approaching $3MM, with strong EBITDA margins. The platform acquisition was financed via an SBA loan/PG and an equity raise a few years ago. I am looking for feedback/guidance on how to structure the potential transaction, the capital raise (debt and equity), and the removal of PG.

Thank you in advance!

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commentor profile
Reply by an investor
from University of Puget Sound in Seattle, WA, USA
I closed an add-on about 6 months ago that was slightly smaller than our platform when we entered LOI, but turned out to be a bit larger than the platform at closing (about 6 months later) due to the platform shrinking after a growth period (a big reason for the add-on as I saw writing on the walls). Still early, but it’s looking like it was a good decision.

I financed the add-on with a conventional loan through a regional bank. I did give a PG on a portion of it, but there was no personal asset collateralization (ie. my home). We did have some prior SBA debt (EIDL) which required a paydown in order to subordinate to the conventional. The SBA initially wanted a 50% pay down, but we ended with 25% pay down: this likely depends on the SBA product and what rep the SBA assigns to your case (our 504 loan didn’t require anything). Happy to discuss this more if you DM.
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Reply by a professional
from University of Massachusetts Amherst in Boston, MA, USA
Hi Sarim, we help ETA entrepreneurs secure funding for their searches. We can potentially help you out with funding. Could you fill up this form: https://form.jotform.com/ridethewave/funding-ally, and please text###-###-#### or email redacted and I can see if we can help you out.
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