Mergers and Acquisitions Help
Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
Vacation Rentals of Florida53 Reviews
Mergers and Acquisitions Help
Most Popular Reply
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
25 Replies
- 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
I wish I could help @Andrew Steffens. I was on the team that did acquisitions but they were other tech companies and the money was in the 9 digits.
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Michael Baum:
I wish I could help @Andrew Steffens. I was on the team that did acquisitions but they were other tech companies and the money was in the 9 digits.
No worries, thanks Michael!
Vacation Rentals of Florida53 Reviews For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
- Real Estate Broker · Galveston, TX · Member since 2019 · 58 posts · 35 votes3y
Quote from @Andrew Steffens:
Hello!
We are in negotiations to buy out a smaller competitor. This is a first for us, and looking to see if anyone had any experience in this as we have a few questions about how it went. Any help is appreciated. Thanks!
Hi Andrew,First of all, congratulations on taking your business to the next level. I am excited for you and your team as you continue to grow! I am passionate about the acquisition process in the vacation rental industry and would be more than happy to share some of my experiences as a seller, the smaller Vacation rental company owner, twice now. First acquisition was a deal with Vacasa in 2014, approximately 51 units. I just closed on my second acquisition/partnership with Porter Vacation Rentals earlier this month, 10 units. I am have joined the Porter team remotely as the Texas Business Development Manager. My tips aren’t complicated, mostly in the area of setting expectations for both parties, from announcement to transition. This can be emotional as well, so communications and processes will make things go smoother for the buyer, seller, guests, owners, vendors, etc. Don’t hesitate to call me if I can help! 🙂
- 3ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
We haven't done this but have heard a couple stories/tips from others who have. One tip that I thought was really good....sign an agreement that if the former owner comes across someone looking for a STR PM, they recommend the buyer of their former company.
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Bill F.:
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
Hey Bill do you this professionally? We are in the discovery phase still, and they are asking a very high valuation so really wondering what the market bears right now before we counter. We are buying the contracts only, 15-20 properties. Do you know the valuation model used for smaller roll ups?
Vacation Rentals of Florida53 Reviews- 1yAllen DuanPro MemberProperty Manager · Los Angeles, CA · Member since 2022 · 590 posts · 463 votesI haven't made an acquisition to but I've been actively looking to grow our company this way. For contract deals, I've heard the valuation should be 1-2x multiple of annual commissions.
Quote from @Andrew Steffens:
Quote from @Bill F.:
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
Hey Bill do you this professionally? We are in the discovery phase still, and they are asking a very high valuation so really wondering what the market bears right now before we counter. We are buying the contracts only, 15-20 properties. Do you know the valuation model used for smaller roll ups?
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Lyndsey Garza:
Quote from @Andrew Steffens:
Hello!
We are in negotiations to buy out a smaller competitor. This is a first for us, and looking to see if anyone had any experience in this as we have a few questions about how it went. Any help is appreciated. Thanks!
Hi Andrew,First of all, congratulations on taking your business to the next level. I am excited for you and your team as you continue to grow! I am passionate about the acquisition process in the vacation rental industry and would be more than happy to share some of my experiences as a seller, the smaller Vacation rental company owner, twice now. First acquisition was a deal with Vacasa in 2014, approximately 51 units. I just closed on my second acquisition/partnership with Porter Vacation Rentals earlier this month, 10 units. I am have joined the Porter team remotely as the Texas Business Development Manager. My tips aren’t complicated, mostly in the area of setting expectations for both parties, from announcement to transition. This can be emotional as well, so communications and processes will make things go smoother for the buyer, seller, guests, owners, vendors, etc. Don’t hesitate to call me if I can help! 🙂
Thanks Lyndsey! We really have questions centering around the structure and the valuation model. Is there any way I could schedule a call and pick your brain a little?
Vacation Rentals of Florida53 Reviews - Real Estate Broker · Galveston, TX · Member since 2019 · 58 posts · 35 votes3y
Quote from @Andrew Steffens:
Quote from @Lyndsey Garza:
Quote from @Andrew Steffens:
Hello!
We are in negotiations to buy out a smaller competitor. This is a first for us, and looking to see if anyone had any experience in this as we have a few questions about how it went. Any help is appreciated. Thanks!
Hi Andrew,First of all, congratulations on taking your business to the next level. I am excited for you and your team as you continue to grow! I am passionate about the acquisition process in the vacation rental industry and would be more than happy to share some of my experiences as a seller, the smaller Vacation rental company owner, twice now. First acquisition was a deal with Vacasa in 2014, approximately 51 units. I just closed on my second acquisition/partnership with Porter Vacation Rentals earlier this month, 10 units. I am have joined the Porter team remotely as the Texas Business Development Manager. My tips aren’t complicated, mostly in the area of setting expectations for both parties, from announcement to transition. This can be emotional as well, so communications and processes will make things go smoother for the buyer, seller, guests, owners, vendors, etc. Don’t hesitate to call me if I can help! 🙂
Thanks Lyndsey! We really have questions centering around the structure and the valuation model. Is there any way I could schedule a call and pick your brain a little?
That sounds like a plan, Andrew. I look forward to connecting & will send you a email/text shortly!
- Rental Property Investor · Victor, ID · Member since 2016 · 59 posts · 94 votes3y
Hey Andrew,
Check out this tool for valuations: https://vintory.com/calculators/company-valuation-calculator...
There are few different ways to go about it. I think this company may even consult, I’ve been impressed with their content. - Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Garrett Kroll:
Hey Andrew,
Check out this tool for valuations: https://vintory.com/calculators/company-valuation-calculator...
There are few different ways to go about it. I think this company may even consult, I’ve been impressed with their content.Thanks Garrett!
We actually use Vintory, I never even thought of consulting them
Vacation Rentals of Florida53 Reviews - Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes3y
Congrats on the potential acquisition!
Quote from @Andrew Steffens:
Quote from @Bill F.:
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
Hey Bill do you this professionally? We are in the discovery phase still, and they are asking a very high valuation so really wondering what the market bears right now before we counter. We are buying the contracts only, 15-20 properties. Do you know the valuation model used for smaller roll ups?
I do not buy STR portfolios professionally. I'm going to interpret discovery as pre LOI diligence, AKA tire kicking.
In terms of valuation, you need to bear in mind that there isn't a 'market' per se. If I want to buy a share of Meta, a super deep market exists that combines the wisdom of millions of educated people's assumptions about Meta's future as a going concern. A 20 property STR portfolio in the Tampa area doesn't have quite the same level of attention and so valuation falls more in the eye of the beholder, mainly being you, the seller, and whomever else comes along. All that to say, don't put a ton of faith in "the market" since you most likely make up somewhere between 10-50% of said market.
When you say you are buying the contracts, what does that mean? I'm not super familiar with STR lingo. Will you own only the deeds to the 15-20 properties and not any of the branding, employees, customer list ect?
All of this makes a difference for valuation. If you want only the properties, go get a valuation of the portfolio and pay some small multiple of the asset value, like 1.1x or 1.15x, to account for getting a group instead of individual properties.
If you plan to buy their business, then you'd pay some multiple of NOI/ FFO. I'm not super sure what multiple STR companies trade at never mind in your local, but I'd be surprised if it was greater than 2x.
At the end of the day both those methods are short cuts for a full on DCF, where you project out future cash flows and terminal value and put them in terms of today's dollars using your cost of capital.
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Bill F.:
Quote from @Andrew Steffens:
Quote from @Bill F.:
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
Hey Bill do you this professionally? We are in the discovery phase still, and they are asking a very high valuation so really wondering what the market bears right now before we counter. We are buying the contracts only, 15-20 properties. Do you know the valuation model used for smaller roll ups?
I do not buy STR portfolios professionally. I'm going to interpret discovery as pre LOI diligence, AKA tire kicking.
In terms of valuation, you need to bear in mind that there isn't a 'market' per se. If I want to buy a share of Meta, a super deep market exists that combines the wisdom of millions of educated people's assumptions about Meta's future as a going concern. A 20 property STR portfolio in the Tampa area doesn't have quite the same level of attention and so valuation falls more in the eye of the beholder, mainly being you, the seller, and whomever else comes along. All that to say, don't put a ton of faith in "the market" since you most likely make up somewhere between 10-50% of said market.
When you say you are buying the contracts, what does that mean? I'm not super familiar with STR lingo. Will you own only the deeds to the 15-20 properties and not any of the branding, employees, customer list ect?
All of this makes a difference for valuation. If you want only the properties, go get a valuation of the portfolio and pay some small multiple of the asset value, like 1.1x or 1.15x, to account for getting a group instead of individual properties.
If you plan to buy their business, then you'd pay some multiple of NOI/ FFO. I'm not super sure what multiple STR companies trade at never mind in your local, but I'd be surprised if it was greater than 2x.
At the end of the day both those methods are short cuts for a full on DCF, where you project out future cash flows and terminal value and put them in terms of today's dollars using your cost of capital.
Thanks for the insight. Whether we buy the "company" or the contracts is semantics because the seller does not really have a company other than legally speaking. He does not have cash in the bank we would be assuming, no real estate owned, employee payroll considerations etc. The value is in the contracts which can just be assigned. Agreed on the value on being what it is worth to us versus a heavily traded item like a blue chip stock. However it seems what most people (aka other people who would be interested parties) is 1x of gross revenue currently.
Vacation Rentals of Florida53 Reviews - Investor · Cleveland, TN · Member since 2016 · 280 posts · 187 votes3y
@Andrew Steffens When you say you "The value is in the contracts which can just be assigned." it makes me think you are dealing with a wholesaler trying to sell you a property. Is that a correct inference?
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Richard Elvin:
@Andrew Steffens When you say you "The value is in the contracts which can just be assigned." it makes me think you are dealing with a wholesaler trying to sell you a property. Is that a correct inference?
Well, I guess it works in a similar fashion. Just like real estate, a property management contract, if assignable, can then be valued and sold.
Vacation Rentals of Florida53 Reviews - Investor · Cleveland, TN · Member since 2016 · 280 posts · 187 votes3y
@Andrew Steffens That makes sense. I misunderstood and thought you were buying a multi-unit property. I don't have any experience in this space, but would it be helpful to valuate it along the lines of servicing a note?
Thanks for answering my question!
Best to you whichever route you choose! - Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Richard Elvin:
@Andrew Steffens That makes sense. I misunderstood and thought you were buying a multi-unit property. I don't have any experience in this space, but would it be helpful to valuate it along the lines of servicing a note?
Thanks for answering my question!
Best to you whichever route you choose!Thanks! I do not think it can be valuated quite the same way. Basically if a house brings in say $100,000 per year in previous or projected income and the management contract is 1 year at 20% the question is usually what the multiple it will bring.
Vacation Rentals of Florida53 Reviews Quote from @Andrew Steffens:
Quote from @Bill F.:
Quote from @Andrew Steffens:
Quote from @Bill F.:
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
Hey Bill do you this professionally? We are in the discovery phase still, and they are asking a very high valuation so really wondering what the market bears right now before we counter. We are buying the contracts only, 15-20 properties. Do you know the valuation model used for smaller roll ups?
I do not buy STR portfolios professionally. I'm going to interpret discovery as pre LOI diligence, AKA tire kicking.
In terms of valuation, you need to bear in mind that there isn't a 'market' per se. If I want to buy a share of Meta, a super deep market exists that combines the wisdom of millions of educated people's assumptions about Meta's future as a going concern. A 20 property STR portfolio in the Tampa area doesn't have quite the same level of attention and so valuation falls more in the eye of the beholder, mainly being you, the seller, and whomever else comes along. All that to say, don't put a ton of faith in "the market" since you most likely make up somewhere between 10-50% of said market.
When you say you are buying the contracts, what does that mean? I'm not super familiar with STR lingo. Will you own only the deeds to the 15-20 properties and not any of the branding, employees, customer list ect?
All of this makes a difference for valuation. If you want only the properties, go get a valuation of the portfolio and pay some small multiple of the asset value, like 1.1x or 1.15x, to account for getting a group instead of individual properties.
If you plan to buy their business, then you'd pay some multiple of NOI/ FFO. I'm not super sure what multiple STR companies trade at never mind in your local, but I'd be surprised if it was greater than 2x.
At the end of the day both those methods are short cuts for a full on DCF, where you project out future cash flows and terminal value and put them in terms of today's dollars using your cost of capital.
Thanks for the insight. Whether we buy the "company" or the contracts is semantics because the seller does not really have a company other than legally speaking. He does not have cash in the bank we would be assuming, no real estate owned, employee payroll considerations etc. The value is in the contracts which can just be assigned. Agreed on the value on being what it is worth to us versus a heavily traded item like a blue chip stock. However it seems what most people (aka other people who would be interested parties) is 1x of gross revenue currently.
I was also under the impression you wanted to buy the rentals.
To be 100% clear, you are buying contracts to manage vacation rentals, correct?
If that's the case, then Id start with a DCF and see what number that spits out.
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Bill F.:
Quote from @Andrew Steffens:
Quote from @Bill F.:
Quote from @Andrew Steffens:
Quote from @Bill F.:
For General Advice
-Get as much agreed to in the LOI as Possible (Asset or Stock Sale, Amount of Seller Carry if any, working capital if applicable, agree on what info will be provided and when)
Other than that we'd need more info to help you out.
Are you buying just the rentals themselves or their STR brand too? What's the rough size of the transaction (# units). What type of questions do you have? Due Diligence, valuation, transition?
Hey Bill do you this professionally? We are in the discovery phase still, and they are asking a very high valuation so really wondering what the market bears right now before we counter. We are buying the contracts only, 15-20 properties. Do you know the valuation model used for smaller roll ups?
I do not buy STR portfolios professionally. I'm going to interpret discovery as pre LOI diligence, AKA tire kicking.
In terms of valuation, you need to bear in mind that there isn't a 'market' per se. If I want to buy a share of Meta, a super deep market exists that combines the wisdom of millions of educated people's assumptions about Meta's future as a going concern. A 20 property STR portfolio in the Tampa area doesn't have quite the same level of attention and so valuation falls more in the eye of the beholder, mainly being you, the seller, and whomever else comes along. All that to say, don't put a ton of faith in "the market" since you most likely make up somewhere between 10-50% of said market.
When you say you are buying the contracts, what does that mean? I'm not super familiar with STR lingo. Will you own only the deeds to the 15-20 properties and not any of the branding, employees, customer list ect?
All of this makes a difference for valuation. If you want only the properties, go get a valuation of the portfolio and pay some small multiple of the asset value, like 1.1x or 1.15x, to account for getting a group instead of individual properties.
If you plan to buy their business, then you'd pay some multiple of NOI/ FFO. I'm not super sure what multiple STR companies trade at never mind in your local, but I'd be surprised if it was greater than 2x.
At the end of the day both those methods are short cuts for a full on DCF, where you project out future cash flows and terminal value and put them in terms of today's dollars using your cost of capital.
Thanks for the insight. Whether we buy the "company" or the contracts is semantics because the seller does not really have a company other than legally speaking. He does not have cash in the bank we would be assuming, no real estate owned, employee payroll considerations etc. The value is in the contracts which can just be assigned. Agreed on the value on being what it is worth to us versus a heavily traded item like a blue chip stock. However it seems what most people (aka other people who would be interested parties) is 1x of gross revenue currently.
I was also under the impression you wanted to buy the rentals.
To be 100% clear, you are buying contracts to manage vacation rentals, correct?
If that's the case, then Id start with a DCF and see what number that spits out.
Yes just buying the management contracts. If we were buying the property I would just value the underlying real estate. Thanks again Bill
Vacation Rentals of Florida53 Reviews - Rental Property Investor · Victor, ID · Member since 2016 · 59 posts · 94 votes3y
Andrew do you see value in other parts of this PM business that you may acquire? I often hear about SOPs, social media profiles, and websites as potentially valuable assets as well. I’m sure it’s a case by case thing, but was wondering if something catches your eye beyond contracts.
I’m curious because as we scale our own PM company, I’d like to think that if these are done well, they would bump up our valuation / multiplier i.e. prospective buyers would value the “how” in addition to the “what”
- Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes3y
Quote from @Garrett Kroll:
Andrew do you see value in other parts of this PM business that you may acquire? I often hear about SOPs, social media profiles, and websites as potentially valuable assets as well. I’m sure it’s a case by case thing, but was wondering if something catches your eye beyond contracts.
I’m curious because as we scale our own PM company, I’d like to think that if these are done well, they would bump up our valuation / multiplier i.e. prospective buyers would value the “how” in addition to the “what"
Unfortunately not so much with this company except the possibility he has a separate cleaning company. He started as a cleaning company and picked up full management from the self managing clients who hired him to clean. We have not evaluated that yet but it is not a big draw for us. If a small company had a huge following and a lot of direct booking with robust guest marketing and a great site, reputation, etc that may add some value, for example.
Vacation Rentals of Florida53 Reviews - Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes1y
Quote from @Cliff Benner:
How has this worked out for you?
I added a niche service for analyzing financials for Business purchases, that are great for small businesses under $5mil in Revenue.
If you are looking for that kind of assistance, please let me know. But it does sound like you are doing something a bit different than buying a business.
Hey Cliff - This did close and was a very niche/unique situation. It sort of ended up a wash as many clients washed out which did not cost us much as we had provisions in the contract where we were refunded. We kept a few decent properties so if they stay long term it will work out.
Vacation Rentals of Florida53 Reviews - Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes1y
There are a lot of factors. If you have a well run company that profits EBITDA $1M+ you can 6-7x. If you are $3M+ 10x. But yes for small acquisitions 1-2x I think it sort of the going rate.
Vacation Rentals of Florida53 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.