Buy small or big oder bigger?

[buy_the_dip]

Hello everybody,
I stand vor a decision and I want to ask you what you think.

I have the change to buy 2 small businesses to my "main business". In the private equity speech "addon on transaction".

The first business will add an EBIT of 3 % of the full revenue of the main business. The second business 5-7 %.
My consideration is: is it useful to buy this 2 small targets? Or should I wait for a bigger one?

Every transaction costs time und humanpower. A small transaction like a big transaction, too.

A am unsure and think, I should buy targets with min. 15 - 25 additional EBIT of the revenue of the main company, instead of so small company like 3 oder 5-7 %.

buy_the_dip

 

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[Kevin88660]

Hello everybody,
I stand vor a decision and I want to ask you what you think.

I have the change to buy 2 small businesses to my "main business". In the private equity speech "addon on transaction".

The first business will add an EBIT of 3 % of the full revenue of the main business. The second business 5-7 %.
My consideration is: is it useful to buy this 2 small targets? Or should I wait for a bigger one?

Every transaction costs time und humanpower. A small transaction like a big transaction, too.

A am unsure and think, I should buy targets with min. 15 - 25 additional EBIT of the revenue of the main company, instead of so small company like 3 oder 5-7 %.

buy_the_dip

We don’t even know what your financial goal is.

 

[buy_the_dip]

We don’t even know what your financial goal is.

Thats easy. To built a 100 million Dollar company from scratch in the next 20 years for my own. The way is the target.

 

[Johnny boy]

I recommend the strategic acquisition of a spellcheck software company. Then you can install it on your computer and turn it on.

Good luck on your path to becoming a billinaire.

 

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[buy_the_dip]

I recommend the strategic acquisition of a spellcheck software company. Then you can install it on your computer and turn it on.

Good luck on your path to becoming a billinaire.

Sorry, Im not a native englisch speaker, Im from Germany ;-)

I will be better the next month...

 

[Jobless]

If you have around 30 employees currently and look to buy small companies 3-7% of your size, those are very small businesses. 1-4 man operations? It does seem like a waste of time, unless it's a strategy you plan to repeat many times (you have a system to integrate them effectively and keep the previous owners engaged) or you want to prevent potential future competition from establishing themselves. Is there anything special about these companies as assets? Probably not.

I'd wait until a bigger opportunity arises, and in the meanwhile try to secure capital and credit to prepare. If the aim is 100 million, build up cash, board members, trust, and information, and possibly you can buy a larger distressed competitor far below market price, when the economy is in a real downturn. As your username says 'buy_the_dip', but more like: 'Buy when there is blood in the streets.'

Of course, I don't know the type of business you have. You probably know your industry fairly well.

Your post is confusing regarding EBIT vs. revenue, the percentages and relative size of the targets compared to your business. Please clarify this. Make it crystal clear, and you will get better answers.

 

[buy_the_dip]

If you have around 30 employees currently and look to buy small companies 3-7% of your size, those are very small businesses. 1-4 man operations? It does seem like a waste of time, unless it's a strategy you plan to repeat many times (you have a system to integrate them effectively and keep the previous owners engaged) or you want to prevent potential future competition from establishing themselves. Is there anything special about these companies as assets? Probably not.

I'd wait until a bigger opportunity arises, and in the meanwhile try to secure capital and credit to prepare. If the aim is 100 million, build up cash, board members, trust, and information, and possibly you can buy a larger distressed competitor far below market price, when the economy is in a real downturn. As your username says 'buy_the_dip', but more like: 'Buy when there is blood in the streets.'

Of course, I don't know the type of business you have. You probably know your industry fairly well.

Your post is confusing regarding EBIT vs. revenue, the percentages and relative size of the targets compared to your business. Please clarify this. Make it crystal clear, and you will get better answers.

Thanks for your detailed answer. You are right I should and will wait for a bigger opportunity to invest.

We have a revenue about 2.5 million. Now to buy a business with 200k revenue is the same "work for integration" as a business with 1 million or more.

Meanwhile I will optimize the current company (revenue, margins and internal processes).

 

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