Where are acquisition values holding?
In the LBM sector, the 10% Adjusted EBITDA margin is fairly common for companies that have a relatively small proportion of commodity lumber in their product mix.
Are you paying yourself FMV rent?
Most companies in the LBM sector have a separate LLC that owns the real estate where they have located their businesses.
Adjustments to EBITDA revisited
Readers of this column know that adjustments to EBITDA are one of my favorite topics.
Watch the spread between GPMs and OPEX %
OPEX % is a key performance indicator, and every buyer analyzes it closely.
‘10 and 10’ companies hold value in any market
Selling your business in an inflationary period doesn’t necessarily mean selling it at a discount.
Selling into an inflationary market
As always happens, we will cycle out of a down market and use the lessons learned to grow even more valuable companies in the future.
Parsing out deal elements as a percent of TEV
Buyers of LBM businesses are overwhelmingly private equity groups, and they think of deal elements (like senior debt, subordinate debt, seller’s notes, earn-outs, and escrows) as a percent of the total they pay for your company.
Congrats are in order! Your GPMs held steady!
A curious question has come up among some buyers we deal with who are acquiring LBM businesses.
Anatomy of a deal
There can be as many as four deal elements that make up an offer to acquire your company.
Five types of EBITDA
EBITDA is a term with a time-worn, clinical definition. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.