Vineyard Estate deal strategy review

[Rahil Jain]

Hi all,

My first post did not go into much detail about the business financials. Based on the questions received, we pressed sellers on specifics and now have greater clarity on the overall health of the business. Here are the details.

• Property: Vineyard Estate, 10 acres
• Primary use: Event venue
• 2021 P&L
  • Revenue: $258k
    • Site rental: $132k
    • Value-added service (e.g. catering, decor): $114k
    • Wine business: $12k
  • Expenses
    • Labor: $24k
    • Supplies: $64k
    • Maintenance: $32k
    • Business Services: $20k
    • Business taxes: $21k
    • Mortgage: $50k
    • Property tax: $13k
  • Net proceeds
    • Profit: $34.8k
• 2022 P&L is worse. Profit at $8k for $254k gross.

My read is that business is moderately distressed. I would pay $1.66M to acquire the business, which would 3x EBITA (~22k avg) + Assets (permits, chairs, tables, etc, $100k). The RE appraisal is likely closer to $1.3M per comparable and the seller themselves.

Deal Strategy: I want to make an offer at $1.46M - all cash with 30-day closing and all contingencies except financial. We have proof of funds for this amount and can get a loan later to save personal funds. This might seem like a lowball offer, but I have a hypothesis. I believe that most buyers would need financing to buy this property. And I think that financing would be hard to get because of the low appraisal value and the poor financial performance of the business. I also know that the sellers are eager to retire and move on. They wouldn't want to deal with any hassles or delays. I hope that they would see the value of my offer: a quick and easy sale with no risk of falling through. I also plan to rationalize why I think their asking price was unrealistic and why my offer was fair. I will also write a letter to tell them how much I loved their property and how passionate I was about their business.

What are your thoughts on evaluation and deal strategy? Anything I am missing or double counting?