How would you buy a $10 million Business?
The availability of financing is boosting sub-$10M add-ons through more leverage and less equity. But platforms are still generating appropriate returns for buyers despite high equity investments.
How Would You Buy a $10 million Business?
Debt? Equity? Both?
Add-Ons and Individual Buyers:
- Senior debt for smaller businesses contributes 66.7% of capital structure (vs. 55.4% in 2023)
- Equity contributions dropped significantly to just 19.6% (from 40.7% in 2023)
- Subordinated debt rose to 13.7% (from 3.8% in 2023)
Platforms:
- Senior debt falls to 31.8%
- Equity contribution jumps to 61.4%
- Multiple arbitrage is significant: 2x EBITDA gap between $1-10M platforms (4.5x) and $10-100M platforms (6.5x)
The availability of financing is boosting sub-$10M add-ons through more leverage and less equity.
But platforms are still generating appropriate returns for buyers despite high equity investments.
Would you rather buy an add-on with high leverage or a platform with more equity?
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