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Deal Structuring

After matching a financial or strategic buyer’s mandate with a target, landing the M&A engagement and building & executing on a buyer list, it is up to the investment banker to work with the buyer and seller to structure a deal. Deal structures initially involve a rough range of valuation to make sure that both parties are in the sphere of reasonability. Reasonable deals typically look like the following:

 

4x <$1M EBITDA

5x ~$1M EBITDA

6x $1M – $2M EBITDA

7x >$2M EBITDA

 

From there we should get an understanding of whether this is:

 

  1. Going to be a majority or minority ownership deal
  2. Whether the owner plans on staying as a CEO after the transaction or whether there is existing management in place
  3. Owner financing is available
  4. Earn outs

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