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?
