Asset Heavy V Low Profit - Business Valuation (UK)

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September 17, 2024

by a searcher from INSEAD in Windsor SL4, UK

Hi Searchfunders. I've been looking a number of businesses with strong Assets on their BS (Haulage & Manufacturing etc) but in comparison fairly low Adj EBITDA. These are equity deals so not interested in just an Asset purchase but even with a Multiple and NAV these businesses are valued well below the Sellers expectations. With Depreciation and Capex expectations taken into consideration and a good business plan in a good market its still hard to see any value from the Financials.

Any thoughts on at least a Platform for valuation and then add the extras for business attractiveness etc... These are businesses circa £500K-max. 1.0M Adj EBTIDA with an Asset value of crica £2.5-£3.5M.

Thanks in advance for any comments advice.

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Reply by a searcher
from Loughborough University in London, UK
Oh yes, I feel this pain on a regular basis ^redacted‌. I think it's the biggest problem in the space for businesses under 1M ebitda. The comparables & DCF models dictate valuations that are much lower than seller expectations. I think there are ways to bridge this and/or manage those expectations, and happy to discuss/share my own insights and experiences. There's definitely no golden rule though. Feel free to contact me on here or via email
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Reply by a searcher
from Glasgow Caledonian University in Glasgow, UK
^redacted‌ we are fishing in a similar pond. I have been looking at a number of similar businesses with a view to formulating the most appropriate deal structure. If you think it useful i can spare some time to have a call and work through how to structure based on a specific example.
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