[FunderFL]

Question for some of the veterans on the board.

What is the industry average to sell your MCA company? Assuming we use a multiple of EBITDA. Unless there are other sell structures being used?

With all the acquisitions on the CC processing side, I would think we could see some on our side in the near future.

Any insight would be very much appreciated. Thank you

[Cfairbank]

depends on a bunch of factors -- EBITDA margin, technology, infrastructure, compliance protocols, distribution channels, scalability, product mix, leverage structure, etc. Was 6x to 10x for full buy-out a couple of years ago, now is closer to 4x to 6x EBITDA (so price is on an EV basis). But it takes a lot more than just strong cash flow to find a buyer of a cash advance company.

There have been quite a few sales, and even more minority equity investments in the space

[FunderFL]

Carl,

Thank you for the response and insight. Speaking of profitability did you find Credibly's stated 2014 revenue of $14.6 million on this years Inc 5000 list to be low? My understanding was Retail Capital now Credibly was funding at least a couple hundred million a year? Unless cost of capital and default rates are higher than expected I don't see how their revenue is only $14.6m.

[Cfairbank]

There is no way their revenue was 14.6 million. Do you mean NI? Even that seems low, but it does seem like they have been paying a decent amount to acquire customers and i know they have invested a lot in their platform after they were acquired by flexpoint (but they should be able to capitalize a lot of those expenses).

[FunderFL]

I thought the same thing, see link below

http://www.inc.com/profile/credibly

Credibly
An alternative financing firm that provides working capital to small businesses that are unable to obtain traditional bank loans.


2015 Inc. 5000 Rank
#306
3-Year Growth
1514%
2014 Revenue
$14.6 M
Jobs Added
43

[Cfairbank]

Wow. That has to be way off.

[FUNd]

14 million is an average of 10 points on 140M worth of funding after ISO commissions, which they heavily depend on. Id say about 10-12M a month in funding volume for a company of their size isn't totally outer limits. They are not a powerhouse like CAN or OD.

[Cfairbank]

14 million is an average of 10 points on 140M worth of funding after ISO commissions, which they heavily depend on. Id say about 10-12M a month in funding volume for a company of their size isn't totally outer limits. They are not a powerhouse like CAN or OD.

I have to assume that number is meant to be gross revenue -- not net of commissions or loss provision. Net revenue, maybe it's 14MM but I would have still thought higher than that. But no way their top line was 14MM.

[BB_Cooper]

14 has to be NOI!! As far EV of MCA shop, it largely depends on the purchasers ability to model returns. Any veterans have comments on the minimum deal flow PE or other purchasers would require to reliably model and value EV of an MCA business?

[AndyYSCISOdept]

In my opinion I think that coming up with the "value" of an MCA company can be really hit or miss because past success doesn't guarantee anything in the future and with the frequency of personnel changes it is hard to quantify how much of past success is down to a system or technology or rather a combination of really talented individuals punching above their weight as a group.

[mcaguru]

Relient (San Diego) is the last known ISO/Brokerage Shop that sold to a vc fund. Its not been officially disclosed (Amount) however that would shed some light on a value.

[Cfairbank]

14 has to be NOI!! As far EV of MCA shop, it largely depends on the purchasers ability to model returns. Any veterans have comments on the minimum deal flow PE or other purchasers would require to reliably model and value EV of an MCA business?

I meant the multiple would be on enterprise value (so including debt), not equity value. Andy's point is a good one regarding the "value" created by people vs platform/systems, which I think makes the sale of a number of highly profitable companies in our space a bit more difficult -- that being said, any buyer will lock up all key personnel to at least 2 year non-competes. For smaller companies that don't have the benefit of scale or top line technology, alternatively can derive valuation by valuing portfolio and origination platform separately -- portfolio is easy to put a value on based on historical performance (but adding the discounted value of projected renewals can be a more difficult discussion) and origination platform alone will generally be worth anywhere form zero to 2x EBITDA.