Northstar pilot — worked instructor resolution
Reconstruct the business rather than adopt the teaser
The broker starts at 500,000 EBITDA and adds 180,000 owner pay,20,000 personal expense and 100,000 repairs, reaching 800,000. Accepted recurring management costs 120,000, only 40,000 repairs are exceptional, and market rent rises 20,000. Managed EBITDA is 600,000. The headline claim exceeds this by 200,000, which would change value by 800,000 at a 4x multiple. The calculation does not resolve credential continuity.
Value and funding
The stipulated 3.5x–4.25x range implies 2.1m–2.55m operating EV. The 2.4m ask is 4x managed EBITDA, within that fictional range. Estimated 20,000 NWC shortage reduces consideration to 2.38m, but restoration uses the same 20,000. Guaranty fee is 53,750, bringing total fees to 150,000. Uses total 2.7m and sponsor cash equity is 500,000 after 2m senior and 200,000 seller note. This fits the 550,000 cash limit but leaves only 50,000 sponsor headroom; required business reserve is funded separately.
Independent financial results
{
"normalized": 600000,
"fee": 53750.0,
"uses": 2700000.0,
"equity": 500000.0,
"service": 317161.76851622865,
"interest": 194478.0868344136,
"cfads": 431119.52170860337,
"dscr": 1.3593048232941218,
"customer_loss": 400000.0,
"downside_cfads": 120000.0,
"downside_dscr": 0.37835581684827124
}
Base buyer cash coverage exceeds the illustrative 1.25x covenant, but losing the 35% revenue customer reduces EBITDA by 400,000 to 200,000. Cash taxes reach zero; CFADS is only 120,000 versus annual service about 317,162. This fails repayment without a funded remedy. No positive historical ratio makes the missing consent immaterial.
Decision and the ten-stage lifecycle
Recommend do not close on the supplied evidence. A conditional LOI may proceed only if exclusivity, cost exposure and evidence milestones are acceptable. Require customer consent and credential continuity before commitment; validate normalized costs, AR, inventory, lease and liabilities. Reject the earnout as an assumed SBA solution. Use genuine permitted transition services with approved scope rather than indefinite retained seller control.
The criteria and search stage correctly identify a potentially attractive business, while teaser/CIM review reveals claims to verify. Initial outreach must follow confidentiality and contact protocols. Preliminary price and base financing work arithmetically; LOI and diligence reveal concentration and transfer gates. Lender commitment, counsel-approved agreements and closing coordination cannot be marked complete. The first 100days plan remains a contingency plan, not evidence the deal succeeded.
A student can earn full credit for declining because the key customer and credential risks dominate thin sponsor headroom. A proceed recommendation requires explicit resolution and a funded downside response, not optimism about sticky customers. Grade the reasoning and the model links, not a predetermined acquisition outcome.
Student pilot · Source packet · Track syllabus
Forward intrinsic valuation and historical underwriting
The specified DCF grows revenue3% for five years while preserving operating ratios, then rebuilds a 2% terminal cash-flow year. These are fictional forward assumptions, not a replacement for the historical 600,000 EBITDA underwriting base.
| Year | Revenue | UFCF |
|---|---|---|
| 1 | $3,090,000.00 | $405,575.00 |
| 2 | $3,182,700.00 | $417,742.25 |
| 3 | $3,278,181.00 | $430,274.52 |
| 4 | $3,376,526.43 | $443,182.75 |
| 5 | $3,477,822.22 | $456,478.24 |
| 6 | $3,547,378.67 | $468,984.33 |
Enterprise value is $2,321,333.37, about $78,666.63 below the $2.4 million ask. Rebuilding terminal NWC at 2% rather than blindly growing the last explicit cash flow is essential. The price is inside the fictional comp range but above this DCF point estimate; neither number resolves customer consent or credential continuity. This strengthens the conditional/revise decision rather than dictating an automatic bid.