Self Funded Spreadsheet
December 09, 2024
by a searcher from University of California, Los Angeles - UCLA Anderson School of Management in Santa Monica, CA, USA
Hi, I have a couple iterations of my own self-funded search models but am looking to compare to someone who is either further in the process or used one to acquire a business. Any help would be appreciated!
from INSEAD in Kirkland, WA, USA
However, I personally wouldn't feel comfortable closing a deal without more fidelity. At a minimum, I'd add:
1) Full returns to the searcher (his model ends at the investors that contributed capital and doesn't show a full searcher schedule that accounts for sweat equity)
2) Cash balances (preferably at least a simplified but full balance sheet) and flowing payments down the waterfall contingent on a minimum balance. I wouldn't want to be paying off preferred equity balance if I didn't have enough money in the bank!
3) Working capital (would be included if you build out the full balance sheet as mentioned above). His model doesn't have it at all so it understates cash flows if you're growing and you have a typical cash conversion cycle.
4) More granular cost modeling. Sam says you can't predict the future too far out, so he keeps it simple. However, I view models as tools to gain insights, not to predict the future. It's very helpful to play around with cost scenarios to stress projections in different ways and get a sense of how things interact.
5) LOC schedule if I got an LOC (Sam's model shows the capacity but it doesn't link to anything). I'd want to know under which scenarios I'd need to draw on it and how I'd be able to pay it off.
from The University of Chicago in Chicago, IL, USA
1) Calculate price and the required equity to achieve target IRR.
2) Calculate price if debt (seller, bank) or equity is limited
3) Asset vs. Stock purchase
4) What if you could, or could not, growing WC and CapX?
5) What if you could or could not step up assets in an Asset purchase?
6) How to structure capital stack to service debt while meeting seller expectations?
7) When doe growth reduce value?
8) When is buyer's expected IRR is irrelevant?
9) How to structure earn-out? Is Earn-out an expense or an adjustment to price
10) Do more assets mean more value or lower value?
11) If you the price and equity, what would be the cash flow, DSCR and IRR?
12) and more.