Was wondering if someone could help - If I'm a restoration services company doing $10m of revenue with EBITDA margins of ~40%, growing revenue at 15% for next five years with EBITDA margins remaining flat. FCF margins of ~ 20%. Given a 5x entry at $4m of EBITDA - what's reasonable in terms of leverage? I was thinking 2x LTM EBITDA. Thanks!
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Based on the highest ranked content on WSO, here are some insights regarding leverage for a restoration services company with the given financials:
Leverage Considerations:
Specific Leverage for Your Scenario:
Free Cash Flow (FCF) Considerations:
Industry Comparisons:
In summary, while 2x LTM EBITDA is a conservative and safe leverage ratio, you might have room to increase this depending on the stability and predictability of your revenue and cash flows. Always consider the specific risk profile and lender requirements when determining the appropriate leverage.
Sources: SaaS LBO, Reasonable entry multiple for buyout target?, Framework for Understanding Results, Got this task during an Private Equity internship interview, how to handle it?, Safe leverage / coverage ratio for LBOs during holding period?
Sounds reasonable. Will be expensive and come with a boatload of covenants and be a direct lender.
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