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Buying a regional rival: what is it worth?
The prompt
A US building-products distributor wants to buy a regional rival. The target earns USD 10 million of EBITDA a year and the seller asks USD 90 million. The chart below shows the multiples paid in five recent sales of similar distributors. The buyer expects cost synergies of USD 3 million a year once fully in place (half in year one), and integration will cost USD 4 million one time. Should it pay USD 90 million?
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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