I don't love when the first LOI in a rollup thesis is at a premium valuation.
"We're paying 7x for the platform because <XYZ>, and then we're going roll up similar companies for 3-4x."
Common (but often dubious) justifications:
• Full back office; platform is SO much better than everyone else in the space.
• Synergies from future bolt-ons lowers the effective valuation.
• Comes with a mgmt. team that will be core to the thesis.
But, if targets in this space are "cheap," why is the first deal expensive?
If you're going to negotiate hard in the future, why didn't you do so for this LOI?
