*nods* and a diligent buyer should look at trends over a few years. Did capex or payroll inexplicably drop a year or so before the sale? That should be part of things that you plan for before your offer. "Hey, I saw that you're running half of your backhauls hot *and* you haven't bought any for two years. I'm gonna knock that off the purchase because you likely set this up." Obviously, more delicately than that.
I've also told my money people that when doing acquisitions, they need to plan some percentage of the purchase price to be spent in the first 90 days, 180 days, etc. improving things. I've heard so much about botched acquisitions because of the lack of attention to the network during the transition time (Rise was like 2+ years out at one point) that by the time they were done with the integration, their purchase was only a shell of its former self. Maybe you need to buy some more backhauls, more APs, maybe you need to implement QoE, etc. Part of my strategy is also more dark fiber deeper in the network. Trade opex for capex. One network I was looking at was spending like $6k/month on DIA. I would have spent less than $6k/month on a pair of glass from Cermak through their network to the rest of our network and then I'd have nearly infinite capacity able to be dropped in more places in their network for resiliency and capacity. I guess conversely to cutting spending to make the financials look better, also look for expansions that were done "cheaply" and with little support to make themselves look bigger for the acquisition. That's exactly what T6 did when they expanded through our area before selling to JAB. To really be able to capitalize on those hasty expansions, you'll have to swap omnis for sectors, cheap radios for better radios, do the marketing that they hadn't yet done, etc. ----- Mike Hammett Intelligent Computing Solutions Midwest Internet Exchange The Brothers WISP ----- Original Message ----- From: "Ken Hohhof" <khoh...@kwom.com> To: "AnimalFarm Microwave Users Group" <af@af.afmug.com> Sent: Monday, December 16, 2024 9:07:56 AM Subject: Re: [AFMUG] KBB for multiples? Oh, one other random thought. Some years ago there was a change in tax treatment for capital gains, I forget the details, but anyone thinking of selling their business wanted to do it before the change. And various consultants and people on the news radio business report telling you how to stage your business for sale. Basically, how to inflate the EBITDA. Accelerate revenue, but mainly cut costs. Fire people, stop doing maintenance and equipment upgrades, stuff like that. Usually that doesn’t bite you in the ass immediately, but it can make current year EBITDA look better. So something to watch out for. In the situation you describe, probably not a factor. From: AF <af-boun...@af.afmug.com> On Behalf Of Dev Sent: Sunday, December 15, 2024 11:51 PM To: AnimalFarm Microwave Users Group <af@af.afmug.com> Subject: Re: [AFMUG] KBB for multiples? This also got me thinking: Who is the buyer and seller? Or really, why the sale is taking place. I’ll start. Seller got injured, unlikely to return to climbing towers. This in parallel with a focus on a sister business that’s more exciting in their current situation, and is capturing their attention to the detriment of [W]ISP. Buyer can more reasonably coordinate frequencies and technologies and there’s a decent mesh. Buyer looking at what is the ‘amplifying’ effect of having a unified fabric across a service area, more POP’s, easier to backfill in order to concentrate on specific projects, like fiber to an MDU or some such. Buyer doesn’t have to upgrade much or any of their systems to onboard Seller’s customers, just helps scale. And then there’s the due diligence, I feel like in some ways we’re shinging a bright light into their closets, which feels overly personal really, but necessary. “Oh, I’m sure they’ll assign that contract”. Sure. Let’s have a look at that contract and contact them. Stuff like that. On Dec 15, 2024, at 3:42 PM, Ken Hohhof < khoh...@kwom.com > wrote: Sorry, I don’t have an answer to your question, but I do have a few thoughts. One, I remember long ago taking a business school class that covered M&A, and it stressed that acquisitions typically happen when the assets are worth more to the buyer than the seller. Many ways this can happen, like you may have synergies that lower costs, or additional products and services you can sell to the customers, or economies of scale, or a way to repurpose assets like real estate. You may be looking a acquiring a company with low EBITDA but your existing staff can take over all sales, installation and support and you won’t need their people. If they have office space, you may not need that. Two, at this point in time, I don’t think you can value an ISP (especially a WISP) without accounting for BEAD but also the new administration. My gut tells me you need to look short term, especially with a WISP. You are buying a revenue stream, I would look at revenue or free cashflow over the next 1-2 years in addition to EBITDA. Three, it depends on whether we are talking a cash sale or some sort of seller financing. Deals are done for something like seller gets X% of the revenue for Y months. That also allays some fears of overstated customer count or revenue numbers. If you are willing to pay cash, I would expect the seller to demand less because he’s probably not going to get a lot of cash offers. More likely seller financing or stock swap. From: AF < af-boun...@af.afmug.com > On Behalf Of Mike Hammett Sent: Sunday, December 15, 2024 2:40 PM To: AnimalFarm Microwave Users Group < af@af.afmug.com > Subject: Re: [AFMUG] KBB for multiples? As someone about to be stepping into acquisition mode, I'd like whatever resources people have in that realm as well. Well, I mean even with "straight EBITDA", surely people are still discounting or adding on attractive or unattractive variables. There are a ton of things that can affect value that don't show up in financials. ----- Mike Hammett Intelligent Computing Solutions Midwest Internet Exchange The Brothers WISP From: "Dev" < d...@logicalwebhost.com > To: AF@af.afmug.com Sent: Friday, December 13, 2024 12:03:41 AM Subject: [AFMUG] KBB for multiples? Okay, there’s no such thing as Kelly Blue Book for valuing multiples if you’re acquiring a [W]ISP, but is there some kind of guidelines, like we’ve already established a negative multiple for obsolete PMP 320’s, but what are 450’s worth per sub? What about Tarana G1/G2? Fiber is sort of more knowable. I guess UBNT is probably pretty low. Someone has to have guidelines/rules of thumb, in case you choose not to do straight EBITDA. -- AF mailing list AF@af.afmug.com http://af.afmug.com/mailman/listinfo/af_af.afmug.com -- AF mailing list AF@af.afmug.com http://af.afmug.com/mailman/listinfo/af_af.afmug.com -- AF mailing list AF@af.afmug.com http://af.afmug.com/mailman/listinfo/af_af.afmug.com
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