World Class Mergers & Acquisitions  |  For Companies $5 Million to $100 Million in Revenue

Beyond EBITDA – 5 Other Factors That Affect How Private Equity Buyers Value Your Company

Prospect Partners is one of the largest and most active private equity buyers focused on acquiring companies with revenues of >$10M but <$75M.  In September they released an article with this same title, and I thought it was so well done I’m reprinting the highlights here.  If you’d like a copy of the complete article, contact me and I’ll send it to you.

It is no secret private equity firms are focused on the bottom line. Profit margins, EBITDA, and growth all impact the value of a business. However, objective measures aren’t the only drivers of valuation. Here’s a look at five subjective variables that play roles in how investors value smaller companies because of their potential future impact on the business.

  1. Who Runs The Shop … And How Well?
    • How deep is the team?
    • Is there a succession plan?
    • Has the owner invested in people in the key areas of the business?
  2. What Does The Market Look Like?
    • Is the business growing faster or slower than its market?
    • How is growth being driven?
    • Is growth sustainable?
  3. What About Concentrations?
    • Relationship concentration?
    • Market segment concentration?
  4. How “Full” Is The Business?
    • The building?
    • The equipment?
  5. Are There Any Human Resources Concerns?
    • Health insurance issues?
    • Employee documentation in order?
    • Minimum wage impact?
    • Labor pool availability?

Again, if you’d like a copy of the complete article, contact me and I’ll get it to you.

As ever, if you know of a business owner who’s thinking of selling or buying a business and who might benefit from a free, confidential, consultation with us, have them contact me directly.

By: Mike Ertel, Transworld M&A Advisors