Financing M&A transactions for Free through Real Estate Sale & Leasebacks

How can you buy 2M+ EBITDA businesses for free or with less equity, by utilising the Real Estate Sale & Leaseback to fund the Operating company transaction? This strategy is being used by our more than 30+ Private Equity & Search Fund clients.

CASE-STUDY:

I´m currently working with a buyer that is wanting to buy a 8M EBITDA business, and he has agreed with the owner a multiple of 5.5x EBITDA, for the entire business. This means that he will be able to keep the entire business for 44M.

He has agreed that he will pay 30M upfront + with 14 million over 3 years.

NOW, HOW CAN HE RAISE 30M, WITHOUT PUTTING IN EQUITY?

1. His Plant & Machinery lenders, will give him 6M, against the P&M asset base.

2. His Cashflow lenders, will give him 6M, IF he plugs in 4M in Cashflow lend.

3. There is Real Estate in the Balance Sheet, that based on audited numbers, is worth around 20M by the bank.

Here is where I come in, with our Real Estate Sale & Leaseback valuation:

Because I value the Real Estate based on the income it will generate for our investors. And given that the market rent is 2,###-###-#### /year, with a roughly 8% Yield,, the Real Estate Sale & Leaseback valuation will actually come in at a valuation of###-###-#### ,000 Dollars.

We are "effectively" structuring the acquisition of the Real Estate at a multiple of 12.5x of the annual rent vs the EBITDA multiple of the business that comes in at a 5.5x EBITDA.


This difference in multiple, adds tremendous value to our client.


Because the buyer is working with me and is getting a valuation of 33.8M vs 20M for the Real Estate, he has 13.8M in valuation difference.

As a process, we will then focus on doing the M&A transaction, simultaneously with the Real Estate Sale & Leaseback transaction, SO that on closing date, our buyer can access the capital from the Real Estate Sale & Leaseback, as equity capital in the eyes of the bank & the seller. Remember, he has accessed this "equity capital" at a multiple of 12.5x, and he is buying the EBITDA at a multiple of 5.5x. In this case:

- 4M of the 13.8M dollar difference, will be used by our buyer for the 6M Cashflow lend required.
- 20M of the 33.8M will be used towards the 30M upfront cash amount.


- The rest will be structured on a deferred payment over 3-4 years.

We have closed on 50+ deals like this and 800M+ worth of transactions like these over the last 24 months for our private equity & search fund clients.


If you have a company with 2M+ in EBITDA under ownership or in a M&A process, and it either leases or it owns its Real Estate, we would be super happy to give you a ballpark proposal.


We do these deals all across Europe, USA, UK, Canada and Mexico. Email: redacted