What is one aspect of valuation that actually pisses off some buyers? Stay tuned to find out.
I am Nick McLean and while I am the most boring guy in private equity, I am not an internet guru that rents Lamborghinis and Ferraris to make everything think I am rich.
All that boredom comes from my almost 20 years of experience in PE and M&A.
There are whole classes on valuation. I would love to do a quick hitting 10-minute video on this topic but it would leave out too much.
In this 75 minute video I share:
00:00 What Pisses Buyers Off?
01:28 Business Valuation Methodologies
05:09 Football Field
07:50 Factors that might increase or decrease the multiple
08:21 Customer Concentration
09:16 Capex
10:05 Macroeconomic Cyclicality
11:13 Project-based revenues vs recurring revenues
11:40 EBITDA margins
12:50 Perceived growth potential
14:00 Industry vs company
15:08 Assets getting special treatment
16:30 Sufficient Working Capital
19:20 Typical Working Capital Mechanism
21:49 Real Estate
25:01 How Real Estate Impacts The Total Transaction Value
28:49 Personal Vehicles and Assets
29:17 Calculating EBITDA
31:50 Adjusted EBITDA
33:51 Quality of Earnings Analysis
35:44 The Data Book
36:32 Sell-Side Quality of Earnings
38:14 Typical Adjustments
40:09 Normalizing Adjustments
41:33 Addbacks
45:53 Offer Structures
49:04 Types of Deferred Considerations
51:30 Rollover Equity
54:55 Contingent Consideration - Earnouts
57:15 Tying it All Together
59:10 SBA Loans
1:02:14 Calculating Pre-Tax Cash Proceeds
1:07:20 Prorations
1:08:00 Taxes
1:12:38 Conclusion
You can contact us here:
🐣 twitter.com/NickFourPillars
💼 www.linkedin.com/company/four-pillars-investors
🖥️ www.fourpillarsinvestors.com
📧 nmclean@fourpillarsinvestors.com
🔎🔎 More about Nick McLean from Four Pillars:
Background: Operations management with an emphasis on Lean manufacturing; strategy development and execution; and mergers and acquisitions (M&A).
Which of the Four Pillars does Nick identify most closely with? ''Servant leadership. I consider one of the primary roles of a manager/leader to be to help those around you be more successful and to develop as individuals. When I think of myself as a leader, I am more interested in granting and sharing authority than hoarding it.''
🏛️ More About FOUR PILLARS:
Four Pillars is a company built on a strong foundation of shared values and a commitment to long-term ownership of small businesses. Their approach is centered on purchasing and operating these businesses while providing support and collaboration without becoming a burden. They work closely with company management, aiming for shared success and sustainable growth.
Guided by their core values, Four Pillars views success as a journey filled with challenges and opportunities. Their values serve as a compass to navigate difficult decisions, whether they pertain to ethics, strategy, operations, or new challenges. They are relentless advocates for the common good, ensuring that every decision is made in the best interests of their portfolio companies and investment partners.
Four Pillars stands out with their creative positioning approach, employing informed and agile strategic planning to leverage the unique strengths and advantages of each company they invest in. They capitalize on key differentiators and foster an entrepreneurial spirit within their team and the companies they serve.
As entrepreneurs themselves, Four Pillars connects deeply with the businesses they work with, offering a balanced perspective and the tenacity needed for success. They are known for their integrity, hard work, and relentless drive to identify opportunities and drive growth. This makes them an ideal investment partner for businesses seeking to excel.
The company's ability and agility are evident in their swift and purposeful actions. They streamline the transactional process while maintaining operational precision, drawing on their experience in both healthy and distressed markets. Their track record speaks to their confidence and precision in executing various deal types, establishing them as leading investors for companies seeking to capitalize on their momentum.
