Raising Capital for asset heavy deal

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May 24, 2025

by a searcher from Millersville University of Pennsylvania in Mantua Township, NJ, USA

Hey Searchfunder, I own an accounting firm and am predominately focused on buying more of those. So obviously very asset light business and easy to model out purchase price and investor returns. However I have an opportunity to partner with someone on buying a business where they will be the day-to-day operator. He's not experienced with modeling or raising capital or getting financing or any of that stuff which is where I'll come in. My question is, how do you go about raising capital and structuring the equity and return profile on a deal like this? SDE = ~$565k Inventory = $367k Assets = $3.3M (probably worth quite a bit less than that with depreciated value) I think the right purchase price for the business is around $2M, which generates a solid IRR profile that from my experience investors would accept. However when I factor in needing to purchase the inventory and the assets as well. It changes my purchase price from $2M to more like $4.1M (again I'm assuming the assets are worth less than what they're showing on their balance sheet since they are fully depreciated). At $4.1M the equity raise is much larger and the IRR drops of significantly. Is there something I'm missing or is this why searcher's don't typically do deals like this? When you add in all the assets and such it makes it over a 7x multiple which obviously just kills the deal. Thoughts and assistance are appreciated!
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Reply by a searcher
from Carnegie Mellon University in Jersey City, NJ, USA
You're using 2 different valuation methods, one based on cash flow and the other based on asset value. IMO, if the fair market value of the assets is significantly larger than the cash flow valuation, a rationale seller may be better off selling the assets and winding down the business. The seller has accumulated unproductive assets and may be best to pass if the seller wants to sell at or above the value of the assets ... unless of course you can make those assets productive under your ownership (strategic acquires could fall in the bucket... Or maybe experienced operators)
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Reply by a searcher
from Baruch College in Red Bank, NJ, USA
You don’t pay extra for the inventory and assets if you are doing the valuation as a multiple of cash flow- that would be double counting. In terms of raising funds, once you have the deal under LOI you can post it on Searchfunder. Also, can request access to Sam Rosati's investor list here https://docs.google.com/forms/d/e/1FAIpQLScc91qp5lpFsymfj3mvZa9Egjnb8VQXztOYT-Sdzg9fx6a4Vg/viewform and start reaching out to folks. And separately, if you tap out your SBA financing on the accounting firms and would be interested in partnering (with someone else using their SBA loan limit and/or capital), feel free to give me a shout. My background is in the financial planning and analysis side of the finance org, so could be complementary.
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