How a $105M Appliance Dealer Learned the (Second) Most Important Number on an LOI

Every founder fixates on the multiple. Tim Hellebrand will tell you the (second) most important number on a letter of intent is the one almost nobody understands until it is too late: working capital. 

When Tim and his four brothers took their $105 million family appliance business to market, six letters of intent came back, and the spread between the lowest and the highest was 60 percent. Most of that gap had nothing to do with the multiple. Don’s Appliances ran on a mountain of inventory, refrigerators and ranges and washers sitting across two distribution centers, and every buyer had a different view of how much of that had to stay locked in the company on closing day. Whatever stayed in was money the brothers did not get to take home. Tim assumed they would simply get their inventory money back. That is not how it works. 

You’ll learn how to: 

• Spot why working capital is the (second) most important number on your offer letter, right behind the multiple. 

• Calculate how the working capital peg can move your proceeds by more than a full turn of EBITDA. 

• Protect yourself if your business carries heavy inventory before you go to market. 

• Understand why the highest offer on the table is rarely the one that pays you the most. 

• Read a 60 percent spread between offers that came from the very same set of books. 

• Carve out your real estate before the deal closes and turn it into your next business. 

• Structure an equity rollover and earnout so you get paid twice when your acquirer is itself acquired. 

Show Notes & Links

Press Release

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Definitions

Letter of Intent (LOI): This document outlines the basic terms and conditions of a deal before a formal agreement is drawn up. It serves as a mutual commitment between the buyer and the seller to move forward with the transaction on the agreed-upon terms.

Due-Diligence: This is a comprehensive appraisal of a business or investment undertaken before a merger, acquisition, or investment. It seeks to validate the information provided and uncover any potential risks or liabilities.

Earn-out: This is a financing arrangement for the purchase of a business, where the seller must meet certain performance goals before receiving the full purchase price. It reduces the buyer’s risk and aligns the interests of both parties post-acquisition.

About Our Guest

Tim Hillebrand

Tim Hillebrand, a second-generation owner of Don’s Appliances, who navigated this decision firsthand. When Tim and his family sold their business in 2023, they turned down the highest offer in favor of the partner that offered the best overall fit. 

From his experience on the other side of the sale, Tim can detail how to balance personal financial security with owners’ responsibility to employees, and offer practical advice to close this gap between financial outcomes and long-term impacts of a sale. He can also share insights about setting your business up for its next stage of growth.