Buying during a pull back?

December 12, 2024
by a searcher from The University of Arizona - Eller College of Management in Gilbert, AZ, USA
Hello Searchfunder,
I'm interested in a business that meets almost all of my key criteria but the TTM for the last 12 months is down about 20% yoy, but still over my sde criteria. This was after two years of banner sales. The numbers are on par with 21 and up to 19. All that said, should I just move on as this drop is likely a sign of things to come? If I decide to move forward with an offer, how do you negotiate a price on a business that clearly has some great potential but is down. My initial thought is buy based on TTM, but tie the seller note as a reverse earn out with forgiveness clauses to be sba compliant.
Open to thoughts on how others have approached deals like this.
from Babson College in Boston, MA, USA
from University of Virginia in Hong Kong
If the above gives me confidence, then I'd value at TTM and earn out on top, as you are thinking and Ali suggests above. If the timing of the recovery uncertain, I'd try to negotiate a lower guaranteed payment and a higher contingent/earn out.
But ultimately, building independent view on future is important for me.