How Sale-Leasebacks are Used in Roll-Ups

Unlocking Capital for Acquisitions When you acquire multiple companies, you often need significant cash for the purchase price and operational improvements. If the acquired companies own valuable fixed assets (real estate, equipment), you can: -Sell those assets via sale-leasebacks. -Use the cash raised to fund further acquisitions or pay down debt. Improving Balance Sheet Flexibility -Sale-leasebacks convert fixed assets into liquid cash without losing operational control of the asset. -This helps maintain operational continuity across the rolled-up companies. Tax Benefits -Lease payments are often tax-deductible, improving cash flow. -Capital raised from sale is not considered debt, which can improve debt ratios and credit metrics. Simplifying Ownership and Operations -Instead of managing multiple properties owned by separate companies, you consolidate ownership with a third party (often a real estate investor), simplifying asset management. Example Workflow in a Roll-Up Context -Acquire Company A that owns its building. -Immediately sell the building to a real estate investor through a sale-leaseback deal. -Use the proceeds from that sale to help fund the acquisition of Company B. -Repeat the process across acquired companies to continually generate cash flow and capital for further roll-up activities. Key Considerations -Lease terms: Ensure the leaseback terms are favorable and sustainable to avoid cash flow strain. -Asset valuation: Assets must be valued fairly to avoid over or under-leveraging. -Investor relationships: Sale-leasebacks often involve real estate investors or funds familiar with these deals. If you are actively pursuing a roll up and would like to know more about this strategy please email me at redacted