The Pave Put Another Paving Company Under Contract. Let's break it down.

October 08, 2024

by a searcher from University of South Carolina in Huntington Beach, CA, USA

The Pave, put another paving business under contract today,

(Thepave.co)

Let's break it down:

Deal Breakdown:

Purchase Price: $15,000,000

EBITDA: 3.5M

Seller Carry Back: $3,000,000

Interest: 4.0% Interest-only payments

Term: 5 years

Bonus: Payments don’t start until 6 months after closing, but interest accrues from day one.

Assumed Existing Debt: $5,205,777 ( blended 8%.If interest is sub 10 it's always best to assume verse taking new senior)

Debt & Equity Financing: $6,794,223

Let’s recap: Total purchase price: $15M Seller carry: $3M Taking over $5.2M in debt Raising $6.7M through debt & equity Net to seller at close: $6,794,223.Key terms:

All working capital stays in the business, so operations don’t miss a beat.

Seller agrees to subordinate the $3M carry to any senior lenders.

The kicker: we set a performance threshold—if EBITDA drops by more than 10% in the forward 12 months we reduce the seller carry to whatever the delta is.

We always tie performance to 10-30% of the seller carry for 12 months post acquisition as the owners stay on for a year or so.

Shoot your thoughts in the comments below

Reply by a searcher
from Brigham Young University in Lehi, UT, USA

Solid deal structure here: $15M Purchase Price with a 4.3x EBITDA multiple. $3M Seller Carry at 4% interest-only, with a 6-month payment delay—smart for cash flow. Taking on $5.2M of existing debt at 8% to avoid higher rates on new financing. Raising $6.7M through debt & equity keeps initial costs low. Performance clause protects against EBITDA drops, reducing seller carry if needed.

The deferred seller carry tied to EBITDA shows confidence in the business’s stability—a win-win that aligns everyone’s incentives.

Reply by an investor
from University of Missouri in Austin, TX, USA

Congrats, looks like an interesting structure managing 3 different lenders (assumed debt, seller note, new debt), how are you managing the new lender with the assumed debt and existing debt you have on your platform in terms of priority, covenants, etc.? This can prove to be challenging.

How much new debt are you adding on the acquisition? Feels pretty levered for the paving sector which is very asset and capex heavy.

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