Live Deal Breakdown: Acquisition FundMar 09, 2022
Today, we will break down a live deal submitted to our Acquisitions Fund from one of our Accelerator clients.
Our Acquisitions Fund is our opportunity to invest alongside our clients where we bring our expertise, experience, and funding to your deals to partner with people like you when and where it makes sense.
In today's breakdown, we will be investigating whether this deal makes sense and hopefully give you some insight into the thought process of what we look for in potential acquisition targets.
This deal was bought to us by one of our clients who went through our program, learned the process, got an LOI (Letter of Intent) from the seller, and secured financing from a bank for 89% of the acquisition price.
Our client is now looking to raise 5-10% from our fund to finance the rest of the deal.
If you want to learn the process and potentially have our fund invest in you and your deal, you can learn more at www.acquisitions.com/apply.
The key things here that I am looking at is the trends, particularly the Gross Revenue and the Gross Profit as a % of revenue.
❓What caused those trends?
❓How many employees delivered those revenues = (What was the revenue per employee?) and how did that change over time?
❓ What are the industry standards for businesses this size in this sector and how do their metrics compare to this business?
❓Notice pre-tax income for 2022 dropped to negative $54,000. What caused that? COVID, mismanagement, buying a significant asset, something else?
❓What did the owner pay himself? This is what we find when we dig deeper into the financials👇
💭 Morans thoughts:
✅ Presentation of the gentleman is good, well spoken and dressed for business.
✅ Experience of the gentleman seems relevant.
❌ No need to pitch with an obviously fake background. Be real.
❌ We are not getting to the point fast enough (Remember time and attention is money and you do not have a lot of it when trying to hook investors)
❓I want to know, what is the deal we are investing in, what is the offer for ME as an investor? What are the returns I can expect? **At 4 minutes in there is still no mention of this
❌ It would be great to be able to see the numbers/presentation while he is speaking (Again, time is money here)
❓We are hearing about the deal structure but I hear no mention of: Why is this business good (better than any competitors we could also buy)
❓What is his plan to sustain and hopefully grow the business?
❓At the end of the day, he wants money and I need to know what I am potentially getting with my money in this deal?
✅ He has got a financial institution to back him, this is good and it proves he has the ability to execute.
❓Notice the company is operating in "growth mode" (usually meaning that its profits are very slim) you then notice that it has a history spanning 35 years. Was this company in "growth mode for 35 years?🤔"
✅ Long term clients exceeding 15 years. This is incredible, the number driver of business value is recurring revenue, why? because a companies biggest expense usually revolves around new client acquisition.
❓Other key questions
- Is the owner willing to stay in the business or not?
- How dependant is the business on the owner himself?
- How do 5 employees handle 5 facilities?
Highlights of the Accepted Offer.
If you want to learn more about how I think about these deals, plus get access to the tools and templates we use you can join our accelerator program.
After completing our training program you can even apply to pitch your deals similar to the above.
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