Anyone purchase a business with large amounts of inventory/working cap?

searcher profile

November 19, 2018

by a searcher from Harvard University - Harvard Business School in Denver, CO, USA

Looking at a distributor with >$5 mil in inventory and not sure what financing strategy would work best. 

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commentor profile
Reply by a searcher
from Georgetown University in Chicago, IL, USA
You'll probably have to share more to get thoughtful response, e.g relative size or working cap or inventory as % of revenue, is the inventory customized for a specific customer, etc.

Instinctively I'd say ABL, but the bankers will scrutinize the underlying assets and could erode your borrowing base for a number of reasons.
commentor profile
Reply by an investor
from King's College London, University of London in Dubai - United Arab Emirates
I'm curious, would this target company still fit the search fund profile? ROE, EBITDA, FCF, etc...does it have contractual revenue sources? (ie are you stocking inventory based on agreed upon contracts to deliver every month or quarter?)
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