I’m in the middle of two internal buyouts. In both cases the companies are in a growth mode, 20-25% over the last year and projecting 15-20% in 2012. Both are profitable companies and both have cash flow issues.
It is not uncommon for growing companies to have the same or greater cash flow issues as slow growing or flat companies. It takes cash to grow. In fact, growth sucks cash. You pay your people every week or two and customers may pay you in 50 days. As you grow, inventory requirements increase, equipment needs to be purchased and people must be added before you have 100% capacity for them (or you have to pay overtime to current employees).
The value of a company is what it is (based on generally accepted methodologies). The price and especially the terms of any transaction are what is important. In both of these cases the payment schedule the seller wants will cripple growth. In one case, the terms could hurt the company if there is no growth and any kind of hiccup with payments, orders or shipping.
The structure of a deal is more important than anything.
