Leveraged Buyout Single Buyer – Get Quality Financial Projections!

Leveraged Buyout Single Buyer – Get Quality Financial Projections!

Leveraged Buyout Single Buyer - Management Buyout Consulting

Leveraged Buyout Single Buyer:  Provide Multi-Year Financial Projections:

Owners of growing companies often get approached by prospective buyers, even when they are not looking to sell. Suddenly, they are faced with a leveraged buyout from a single buyer. But owners that engage in those discussions, often face a challenge as the talks intensify. The challenge is they are talking to a single potential buyer, so they can’t use competition (i.e. interest from multiple bidders) as a way to drive up the Company’s price during negotiation. 

One way to create leverage in those situations (leveraged buyout single buyer) is by proactively providing the buyer a multi-year financial projection. Most buyers only ask for historical financials, but proactively providing projections can help in two ways:

  • One, if the Company is growing year over year, it allows the seller to demonstrate that continued growth is very likely and should be factored into the valuation.
  • Second, if the seller is trying to realize a certain target value for the business, the seller can use multi-year projections to illustrate that the Company is on track to meet or exceed the seller’s target valuation* within the next couple of years. This allows the seller to say “I am not selling until I reach my target value even if it takes me a few years.” Now the buyer must decide if they are willing to meet the seller’s target price or walk away.

As an example, I was recently working with client looking to buy a business that was growing about 20% per year and generating over $3M in EBITDA. The company also had significant backlog and the owner had a target company valuation of 10 times (X) forecasted year end EBITDA (a very high price compared to most businesses). We were in the process of reviewing the financials when my client got a call from the seller saying another unsolicited offer came in at his target price and he was taking their offer. The seller was able to sell at the premium 10X EBITDA value because he was driving growth, illustrated that in his projections and clearly articulated his value and his path to reach it within the next three years. 

So if you get approached to sell your company, and are realizing strong growth, make sure to put together quality financial projections to use as leverage to drive up price. It may help you get the value you want for your business!  

(*Company value for private businesses is typically based on a some multiple of EBITDA. Sellers must then project forward EBITDA which can then be used to make assumptions about the likely future value given a multiple or range of multiples applied to EBITDA).

Topic: Leveraged Buyout Single Buyer Corporate Financial Consulting

Read More Blog Posts By Lantern Capital Advisors:

What’s Your Available Cash? An important, overlooked Financial Key Performance Indicator (KPI)

What Our Clients Say About Us...

“Chris is a very smart and practical experienced business professional. He played devil’s advocate and had great thoughts around what makes sense, where the value is, and what would reasonate with investors and thought about problems that I hadn’t contemplated."

Mike Toplesik, President Quology Direct and Mimaltar

Management Buyout

Lantern Capital Advisors is a corporate financial consulting firm that helps growing companies find the financing solutions to fund management buyouts while keeping management in control and preserve and/or maximize ownership.

Learn More About Management Buyouts

Growth Capital Financing

Lantern Capital Advisors helps growing entrepreneurial companies effectively plan and finance their growth using a corporate financial planning process that appeals to business owners and works consistently well.

Learn More About Raising Growth Capital

Owner Liquidity Financing

Lantern helps companies secure capital from a variety of financing alternatives to help owners take capital out of their business and provide for some owner liquidity financing.

Learn More About Owner Liquidity and Owner Exit Strategy

Contact Lantern Capital Advisors...

Lantern Capital Advisors is a corporate financial consulting firm that helps growing companies secure financing from a variety of capital sources.  Our fees are based on our time and do not vary based on the financing or funding sources our clients choose.  Our fees are ofter a fraction of the cost of those charged by investment banks or brokers for a similar service.  Our process allows us to provide early feedback direct from funding sources within weeks of starting a project.

Leave a Reply