When should I take on investors?
August 29, 2024
by a searcher from The University of Arizona - Eller College of Management in Gilbert, AZ, USA
I'm working a deal, highly overlapping with my background. The size is fairly large 1.5 ebitda in 2023, trending for 1.3 this year. I'm thinking about bringing on investors to strengthen my position to close the deal. I know there are a lot of ways to go here but I'm not looking to give up more than 30% of the business and preferably none at all. Can anyone share their ins and outs on bringing on investors or even resources to review before talking to investors on an smb deal?
from McGill University in San Diego, CA, USA
These resources might be helpful:
https://bentigg.beehiiv.com/p/selffunded-sba-acquisition-structuring-explained?utm_campaign=welcome-to-the-smb-scoop-newsletter-by-ben-tiggelaar&utm_medium=newsletter&utm_source=bentigg.beehiiv.com
https://acquiringminds.co/webinars/how-to-raise-equity-to-buy-a-business-part-1
https://acquiringminds.co/webinars/how-to-raise-equity-to-buy-a-business-part-2
from Dartmouth College in Boston Metropolitan Area, USA
I also agree w Robert - do you want investors? if so, why? for expertise or for the equity check;? If you are paying 3-4x of the 1.3M, or 3.9M to 5.2, and can get the seller to finance 5%, and you put 90% leverage on, then you need to find up to $260k equity to close the deal. it will be easier for you in the long run to get the seller to finance the full 10% than to getting and dealing with an outside investor for years. That entire arrangement will complicate things when operating the the business will be challenging enough.
now if you are not leveraging up to the max, and need a $1-2M equity infusion to start with lower debt levels, then think about the type of investor(s) who can help you during the journey.
happy to chat live - DM me. if EBITDA is sliding, bid on the lower end of 3-4X. Look closely at your cash flow forecast