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Reddit mentions of The Art of Distressed M&A: Buying, Selling, and Financing Troubled and Insolvent Companies (Art of M&A)

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We found 1 Reddit mentions of The Art of Distressed M&A: Buying, Selling, and Financing Troubled and Insolvent Companies (Art of M&A). Here are the top ones.

The Art of Distressed M&A: Buying, Selling, and Financing Troubled and Insolvent Companies (Art of M&A)
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Found 1 comment on The Art of Distressed M&A: Buying, Selling, and Financing Troubled and Insolvent Companies (Art of M&A):

u/ideadude ยท 0 pointsr/startups

I went through the process of trying to sell a failed startup a few years ago. I read this text book on "distressed assets", which is a technical term that might help you do some research on this. I can't find the exact text book, but it was something like this one.

The basic formula is:

  1. Make a realistic estimate of how much money the business will make in the future... revenue and earnings if you can estimate it.

  2. Figure out a good "multiple" on revenue or earnings based on the industry and other factors.

  3. Calculate a "discount rate" to take into account the risk that the business never makes as much money as you think it will.

    So as an example, with my former business I estimated that within 2 years it could bring in $500k/year revenue. I used a 2x revenues multiple to get a $1mm valuation. With a conservative 20% chance of getting there, I asked for ~$200k.

    If the business is nowhere near cashflow or you don't have a good way to estimate future value... if it could make anywhere from $0 to $100mm... then I'd suggest negotiating for a large advisors % in the company just in case it becomes the next big thing.

    Edit: Addressing the downvotes. (1) That's not an affiliate link to Amazon. (2) I'm not addressing OP's situation exactly, but I've been thinking about this recently and thought it might be a useful real world case of how to "value a company with no income".