[PE Interview Prep] Financing a Seasonal Commodity Business

Hi folks,

I'm currently preparing for a PE interview and wanted to get multiple opinions on this question: A) How would you think about trying to finance the acquisition of a seasonal commodities business? B) What if the business were not expected to generate unlevered FCF for the next two years?

Looking forward to the comments!

Here are my thoughts:

Establish Objectives - Business objectives = target IRR + MOIC. - Exit strategy: liquidation, sale, IPO. - Liquidation: purchase assets with high cash flows. - Sale/IPO: Improve EV/EBITDA

Macro - [Fund side] Time acquisition of business. - Look at macro variables: Changes in the US dollar, Cartels (ex: OPEC.), Production and inventory supplies, The global economy, Deals and treaties. - [Investor side] Empathy → lower initial debt:equity ratio but entice with dividends.

Strategy - [Balancing Supply + Demand] Make room for future debt via M&As to diversify cashflows and business segments. Frameworks: SWOT, 5 forces, etc. - Time dividends with low UFCF. Need to understand why no UFCF. Poor margins = bad. High CAPEX = could be good. - Monitor