FAQs for Buyers
How do I determine what a business is worth?
Business valuation involves analyzing multiple factors, including historical financial performance, future earnings potential, market conditions, and industry benchmarks. At Evolution Advisors, we guide buyers through the process, which may include a third-party valuation.
What is EBITDA and why should I care as a buyer?
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) represents the cash-generating capability of business operations before financing decisions and non-cash charges. As a buyer, EBITDA is critical because it shows you the earning power you’re acquiring and forms the basis for most purchase price calculations. Understanding EBITDA helps you compare opportunities across different businesses and industries.
What's the difference between EBIT and EBITDA?
EBIT (Earnings Before Interest and Taxes) includes depreciation and amortization expenses, while EBITDA adds these non-cash charges back. As a buyer, EBITDA is generally more useful because it approximates operating cash flow and isn’t affected by accounting policies around depreciation. However, you should understand capital expenditure requirements to maintain the business, which depreciation may reflect.
What deal structure is best for me as a buyer?
The optimal structure depends on your situation. Asset purchases provide more tax benefits and limit liability exposure but may face customer or contract assignment issues. Stock purchases are simpler for continuity but include all liabilities. As a buyer, asset purchases are generally preferred for liability protection, though stock purchases may be necessary for certain licenses or contracts. We help buyers evaluate structural options and negotiate favorable terms.
What should I look for during due diligence?
Conduct comprehensive due diligence covering financial verification (reconcile adjusted EBITDA claims, verify revenue and expense trends), customer analysis (concentration, contract terms, satisfaction, retention), operational assessment (key person dependencies, vendor relationships, systems and processes), legal review (contracts, compliance, litigation, IP ownership), and cultural fit (employee turnover, management capability). Due diligence is your opportunity to validate assumptions and uncover risks before closing.
What is a CIM and what should I expect?
A Confidential Information Memorandum (CIM) is the detailed marketing document sellers provide to serious buyers after you sign an NDA. The CIM presents the company’s history, operations, financial performance, and opportunity. As a buyer, the CIM is your primary source of initial information, but understand it’s a marketing document – verify all claims during due diligence and view projections skeptically.
How can Evolution Advisors help me as a buyer?
Evolution Advisors represents buyers throughout the acquisition process. We help you identify and evaluate opportunities, conduct independent valuation analysis, manage due diligence and coordinate advisors, and negotiate purchase agreements and terms. Our experience across hundreds of transactions helps buyers avoid costly mistakes and identify attractive opportunities.