Preferred Equity Model Review

by a searcher from Western Illinois University

2 years ago

Would love a fresh set of eyes to look at a preferred equity model I'm working on.  
Fairly basic and the numbers are all made up.   

If anyone else is considering the same kind of model, we could team up to make the model crisp.

Purpose:  Analyze/Pitch opportunities using the preferred equity model.   I'd be looking to self-fund advisor/deal fees and a portion of the equity required, but would also seek outside capital in exchange for preferred returns & common equity. 

https://docs.google.com/spreadsheets/d/1uukKW_EkB-8mUDr81ZTdS6okrOs1-MCG/edit?usp=sharing&ouid=100875197417244069089&rtpof=true&sd=true

7 likes
396 views
18 comments

searcher from The University of Michigan - Stephen M. Ross School of Business

Also, it is fairly common to have a standby period where there are no payments (or interest only payments) on the seller note for the first 1-2 years. Interest will still accrue- but once again, this could free up cash and create a good safety margin

2 years ago | like reply | 2 likes

searcher from The University of Michigan - Stephen M. Ross School of Business

Hi Tim- While I can't give you tax advice- you should look into the value of the assets that you are acquiring. In some cases you may be able to deduct the entire value of the assets in Y1 and the remaining goodwill (purchase price-assets) over an extended period (15 years). This will help your cash flow as your tax basis will be "positively" impacted. All deals are different, but I believe that this could be a good examination point.

Anyone else have a comment (or corrections) on taxes?

2 years ago | like reply | 1 like

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