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Buyer Profile: Individuals & Search Funds

Individuals and search funds like to be in the 3x to 4x range. Be sure to qualify these individuals ahead of time. You realistically only want financials and strategics talking to the seller for deals with approx $1M of EBITDA up. Deals south of $1M EBITDA, you start to get into the individual buyer range of reasonability.

 

Qualify individual buyers to make sure you are talking with PE and strategics for deals approx. $500k EBITDA up. Individuals and PE search funds should be looking at smaller deals where their multiple expectations of 3x to 4x are in line with the size of the company.

 

On solid perpetuity deals, the seller is willing to wait for a strategic buyer even if it takes a longer time period.

 

Individual buyers are looking for companies that they can run passively and work on growing the business instead of working in the business doing the manufacturing, building the product etc. They do not want to be operators in addition to owners. Unfortunately, their multiple expectations of 3x to 4x are very close to only qualifying them to speak with owner/operator businesses.

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