How do you feel about real estate included in deals?

April 01, 2019
by a searcher from Harvard University - Harvard Business School in 126 Brewster Rd, West Hartford, CT 06117, USA
I'm curious to hear about your experiences involving real estate packaged with businesses for sale. How did it change your view or valuation of the business? How did it change the feasibility of the deal or your financing approach?
from Fort Lewis College in Denver, CO, USA
What makes a business acquisition attractive is the ROI/IRR on a deal at an attractive multiple. Tying capital/debt up in real estate that has a much less attractive return (when most real estate prices today are at a premium anyway) doesn't make much sense to me. Plus, usually I find it is a piece of real estate that I would never consider buying independently (without the business). You can find an appraisal (even today) to support a lot of crazy prices, so even that price "support" is suspect in my mind.
If it's an amazing business, maybe that changes the analysis. I just feel like in many cases you are overpaying for real estate with a small return, to get a business which is really all you want anyway. I would rather take the extra capital (I would use as equity for the real estate) and invest it into the business to grow/improve it substantially as that seems likely to have a much better return and potentially lower my risk.
from University of Notre Dame in Pittsburgh, PA, USA