{ "media_type": "text", "post_content": "My dads business did 15m In ebitda in fy20 and he got an offer from PE for 10x ebitda and he’s taking it. Since offer came they’ve grown like 40% and he’s forecasting over 20m ebitda for 21. I think he should go back to market. He says no it’s a good offer mostly cash and he rolls forward to keep 15% of company. He doesn’t need money as this isn’t his first sale. Seems crazy to leave a lot of money on the table but maybe im thinking about it wrong. What do you all think? He owns 60% of company.", "post_id": "607639c49a9ba1002061bf6b", "reply_count": 63, "vote_count": 5, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting", "feed_type": "crowd" }
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My dads business did 15m In ebitda in fy20 and he got an offer from PE for 10x ebitda and he’s taking it. Since offer came they’ve grown like 40% and he’s forecasting over 20m ebitda for 21. I think he should go back to market. He says no it’s a good offer mostly cash and he rolls forward to keep 15% of company. He doesn’t need money as this isn’t his first sale. Seems crazy to leave a lot of money on the table but maybe im thinking about it wrong. What do you all think? He owns 60% of company.

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Valuation depends on many things. It could be that that growth potential was already priced in bc that EBITDA multiple is on the very reasonable side. I would try to renegotiate very politely (mostly because funding may already be planned for etc.) and if it isn’t fruitful just let it ride. Buyer could have to reevaluate their diligence and if they’re not willing to do that it could break the deal.

Maybe he can negotiate a performance bonus for after closing or something.

In above comment I left you can see there is some incentive on back end but it’s just participation. Growth could be priced in. It is traditional biz

Good for your dad! He has done well and I like that he is sharing some with his long-term employees.

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I think he should adopt me

likefunnyupliftingsmart

Lol yea he’s amazing

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Is your father looking to adopt a 23 year old man?

likefunny

A bird in the hand is worth two in the bush.

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I think this is right

10* ebidta is very high.n usually sales happen with a 4-5 multiple. He should take the deal.

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Did I miss where the OP said what industry? Not sure how you can say 4-5 is the average without knowing that.

I am on a deal right now that's 4-5 and just was in one that closed at 19x.

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Why put yourself through the stress and potential heartbreak if you’re already filthy rich?

Sounds like your dad has some good perspective on life. Sell-side M&A processes are horrible to go through, most of all for the CEO. My dad has done it multiple times too. If you have tens of millions on the table, incremental $ are borderline worthless relative to another 6 months of stress.

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Smart man!

Want a PE Operating Partner? :)

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I do ok:) can also make more if your dad wants to hire me!

What’s the payout schedule and retainer clause?

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Yea and the participation on next deal they are projecting like 110-130 total take for my dad on this deal plus next deal. Obviously optimistic on second event but good market right now so more probable

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I really want to hear the results of this story 12-24 months from now either way

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I think he should hire a team of consultants to figure that out.

likefunny

I will be an AC after graduation 😉

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What type of business

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I think your dad should talk to his investment bankers assuming he has some.

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Yea he does. A lot of moving parts but feels like he could sell biz for over 200 if he just walked

Jesus in poor

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Does he own the entire company? Pretty sick if he does. Is it marketing tech or just a firm? If latter, 10x seems reallly rich

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He did but he gave away 40% of it to employees who have been with him along the way. They do some tech but mainly it’s a traditional marketing business

I’m too poor to be here

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Nah you’re doing great money ain’t everything. Just one thing

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One in the hand, is worth two in the bush.

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Did they price in that growth? Maybe he just wants to retire...

It’s a traditional industry that sees 8-12x on earnings. 10 is good given it’s a smaller business but they’ve just grown so much. He says you never know what happens. Could lose a big piece of biz. But PE that bought wants to platform them out and tuck in some companies and sell or maybe Spac at 4-5x what they bought for which is another payday for my dad. Would be like another 50 in his pocket. But biz pays him over 10 a year anyways. Don’t know

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What kind of business does he run?

Marketing

Aren’t most deals done on TTM anyway? So the cheque should scale up

It’s a good point. One of his LOIs from a different offer was but he didn’t like the structure. Don’t think this one is

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What’s the gap in FCF on the growth? The same between 15 and 20? Or has something substantially changed on the balance sheet? How did the 40 percent come about? Organic? Investment?

Organic. Couple big pieces of biz

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