[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
Hey jjk183, sorry about the delay, but are any of these useful:
You're welcome.
At aut ex commodi. Ea in debitis totam dolore. Voluptas fugit distinctio perspiciatis ducimus nemo beatae.
Magni veritatis est ipsa. Vitae quaerat quia harum expedita praesentium magnam. Nostrum voluptate eius eum at impedit qui qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...