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Purchasing and Valuing a Distressed Business.

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Hopefully this is a good place to ask this question. I am looking at purchasing an existing service company but I am interested in what other people think it is worth.

It has Revenue of close to $2 Million per year, but a margin of only about 5-7%. The current owners seem to be good at making sales, but not running a business. The company went through bankruptcy reorganization and came out of it still operating and making a profit, however still has lots of debt and next to no money in the bank.

The good news is they have about $1 Million in tangible assets in relatively good condition and only $200,000 or so in loans associated with those assets. They also have a good customer base, which includes a long term government contract which is about 10-20% of their revenue.

They were asking around $1 Million to take it over. That is about 7x net income. Seems too high for such a distressed company, despite the assets and contracts.

What do you think?

Topic starter Posted : 02/07/2012 3:25 pm
Active Member

Re: Purchasing and Valuing a Distressed Business.

This presentation is a "must attend" for workout groups, credit officers and special loans teams. But the content will certainly be of interest to anyone involved in commercial lending.
This one hour presentation will tackle one of the most relevant topics in recent years - valuing distressed businesses. It will focus on essentials lenders need to know about valuing a distressed business that will help them manage risk and minimize losses. The webinar will take a deeper dive into the valuation of uncertain cash flows and the value drivers that private equity groups and corporations consider when purchasing a distressed business during these economic times.

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Posted : 31/10/2012 1:34 am