Deal or No Deal?
22. “I think you [should always look] very hard at the financials—revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and … growth: How much has the business grown in the last three years? Those are the key areas I would emphasize. One of the things that you need to ensure is that the seller is properly allocating all of the expenses associated with running the business to the business, so that they are not showing an inflated EBITDA.”
—Reed Phillips, managing partner, DeSilva & Phillips
23. “Do extensive operation, financial and legal due diligence. Focus on the industry and the company dynamics. Where is the growth going to come from?
24. How dependent is the business on the owner/management team?
25. Get good advice from industry professionals—accountant, bankers and lawyers. It’s better to do due diligence before the deal closes than to find out later.
26. Look at historical results versus projections. High growth projections in the next couple of years if historical growth is low should be vetted extensively.
27. Ask why the company is selling. There should be a good reason.”