What to look for before making a purchase offer

Before making a purchase offer for a Mexican SME, an indicative offer presented without prior analysis is a weak position. The seller reads it, compares it with others, and if your number is not backed by clear logic — on EBITDA quality, customer concentration, owner dependence, revenue trend and legal and tax structure — it does not generate serious conversation: it generates a counteroffer or silence.

Not all of these factors can be confirmed without access to the data room, but all can be preliminarily evaluated with available information.

What are the five factors you should evaluate?

  1. EBITDA quality

    The EBITDA the seller presents is almost never the one the buyer should use to calculate price. Common adjustments that inflate the reported figure: owner salary below market, personal expenses mixed with operations, non-recurring extraordinary income, and deferred expenses that eventually hit. The buyer needs their own estimate of normalized EBITDA — not the seller's. If the CIM does not include a documented normalization bridge, request it or model from the statements available. A 20% difference in normalized EBITDA at 4x multiple is almost a year of EBITDA in price.

  2. Customer concentration

    A business where 60% of revenue comes from three clients is not worth the same as a diversified one — even if EBITDA is identical. Concentration is direct risk: if one of those clients leaves after closing, EBITDA drops and the multiple paid goes up retroactively. In Mexican SMEs, concentration above 30% in a single client justifies a lower multiple or a larger contingent tranche; above 50% in three clients is a red flag that requires analysis of contracts, tenure and owner dependence.

  3. Owner dependence

    If the founder is the main relationship with key clients, the main supplier or the only one who knows the full operation, the business has transition risk that the price must reflect. It is the most common finding in SMEs and the one that most pushes toward long earn-outs or large contingent tranches. Key questions: what happens if the owner leaves in 90 days? Is there a team that can sustain the operation? Do key clients have a relationship with anyone else? The answers define the consideration structure as much as the price.

  4. Revenue trend

    A business with stable EBITDA but declining revenue is a different thesis than one with growing revenue. The multiple must reflect direction, not only current level. Three years of statements show whether it is gaining or losing position — and whether stable EBITDA is efficiency or cuts that eventually affect the operation. The relevant question is not "how much does it earn today?" but "how much will it earn in years 2 and 3 under new management?" A business in contraction requires an explicit turnaround thesis — not just a low multiple.

  5. Legal and tax structure

    In Mexico asset purchases are more common than share purchases because the buyer does not want to inherit hidden liabilities. Be clear on: corporate structure, tax situation (SAT, IMSS, Infonavit), contracts with change-of-control clauses, and active or contingent litigation. Nothing is fully confirmed before the data room, but the seller must be able to answer preliminary questions. An evasive answer on legal structure is a red flag before signing the LOI. More in due diligence and representations and warranties.

How to model return before presenting the offer?

An indicative offer is not only a price — it is a return thesis. The buyer who arrives with a justified multiple, a modeled consideration structure and preliminary analysis of the five factors has more negotiating power than one who arrived with an unsupported number.

Use the buyer return calculator to model IRR and money multiple before presenting any offer.

In the blog:

How to prepare your company for sale — what the buyer reviews before offering.

The process of sale: what the buyer does at each stage — documents and decisions by phase.

How to find businesses for sale in Mexico — sources and evaluation.

Financing for business acquisitions in Mexico — debt, seller note and mixed structures.

Why your company may be worth less than 3x EBITDA — factors that reduce the multiple.

How to value a services company in Mexico — multiples and key factors.

Sources

When these five factors are reflected in your return thesis, in the price and in the consideration structure you propose, the offer will have a solid base. For the step from preliminary analysis to a competitive and defensible offer, see the guide on how to structure a purchase offer in Mexico.

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What to look for before making a purchase offer | Capital En Orden