Lacaillade: Lower middle market buyouts offer a repeatable 3x-5x return model
Peter Lacaillade · Peter Lacaillade: Why Now is the Best Time to Invest in Emerging Managers | E1096 · 20VC with Harry Stebbings · Dec 18, 2023 · at 58:45
Peter Lacaillade, Managing Director at SCS Financial, details the financial engineering and EBITDA growth dynamics of lower middle market private equity buyouts.
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“So you buy a founder led business, you professionalize it, you buy it at like six to eight times EBITDA. You put on like maybe three turns of debt, maybe three to four, depends on the business, but you professionalize it, you grow it, say it had five million EBITDA, you grow it to twenty-five million EBITDA. And then the next buyer, the mid market buyer will pay You know, 10 to 14 times EBITDA for it. And they are going to lever it, you know, I mean, changes, interest rate environment, but like five to seven times. And that math works really well. So you're able to like, you're taking small business risk and you got to know what you're doing. But you're not using as, you're not using that much leverage, and you're about growth and professionalization. Like, it's a really repeatable, and there's a huge basket of buyers. It's like a really repeatable, great way to make, you know, three, four, or five times your money.”
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