An education services acquisition, structured with a $300K deferred payment
FGO Finance Group funded the acquisition of an education services business priced at $1.8M, a 3x EBITDA multiple. Rather than funding the full price with senior debt, we structured a $300K vendor deferred payment alongside a $1.3M debt facility. The deferred tranche reduced day-one borrowings and brought opening leverage to 2.1x, de-risking the deal for both buyer and lender.
| Business | Education services |
|---|---|
| Finance type | Business acquisition finance with vendor deferred payment |
| Acquisition price | $1.8M |
| Debt facility | $1.3M |
| EBITDA multiple | 3x |
| Deferred payment | $300K vendor deferred |
| Opening leverage | 2.1x |
The opportunity: acquiring an education services business
The buyer identified an education services business available at $1.8M, priced at a 3x EBITDA multiple. The business had established revenue and a clear operational profile. The structural challenge was how to fund the acquisition without loading the business with debt that would pressure cash flow from day one.
- $1.8M acquisition price at a 3x EBITDA multiple
- Established operating business in the education sector with a proven revenue base
- Funding structure needed to keep opening leverage at a level both lenders and the buyer were comfortable with
- Vendor willing to defer part of the consideration, creating room to reduce day-one debt
How do you structure a business acquisition to lower day-one debt?
A vendor deferred payment is an arrangement where the seller agrees to receive part of the purchase price after settlement rather than at the date of sale. In this deal, the vendor agreed to defer $300K of the $1.8M price. That reduced the amount of debt the buyer needed to raise on day one.
FGO secured a $1.3M debt facility to fund the balance. With the $300K deferred payment sitting outside the initial debt stack, opening leverage landed at 2.1x, a materially more conservative starting position than if the full price had been borrowed. Lower opening leverage means the business has more headroom to service debt from its earnings in the early months of ownership.
The structure benefited both sides. The buyer started with a more manageable debt load. The lender had a cleaner credit profile to assess. And the vendor retained an ongoing financial interest in a successful transition.
Questions this deal answers
How does a vendor deferred payment lower acquisition leverage?
A deferred payment lets the buyer pay part of the price later, so less debt is needed on day one. Here a $300K deferred payment brought opening leverage to 2.1x on a $1.8M acquisition.
How much debt can you raise to buy a business?
It depends on earnings and structure. In this deal, FGO secured a $1.3M facility against a $1.8M acquisition priced at a 3x EBITDA multiple.
What EBITDA multiple do small business acquisitions transact at?
It varies by sector and size; this education services business transacted at a 3x EBITDA multiple.
Thinking about acquiring a business? Read about how FGO approaches business acquisition finance, or browse more client case studies.
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