What if I can’t afford to buy a business outright?

Buying less than 100% equity in a business

An example calculation of how to apply a funders parameters and the results of a shortfall in funding

If for example, the target business has a valuation of £1m (based on 4x £250,000 ebitda), then buying 100% costs £1m. The buyer is going to introduce £100,000 personal capital and typical deal costs are assumed at £120,000.

• An assumed completion payment of 60% equates to £600,000.

Add in the deal costs of £120,000 makes £720,000.

Deduct the capital introduced by the buyer, say £100,000.

That gives a net amount to finance of £620,000.

If a funder will only offer 2x ebitda, this generates a funding pot of £500,000.

Therefore there is