Replies to post #52935 on iQSTEL Inc (IQST)

[lishious]

BM would say IQST will cross sell and make it a profitable acquisition.

[Boiler_Master]

Private companies tend to sell for roughly 5x to 10x their annual profit. Depends on the industry, growth potential etc. That provides the buyer a 10% to 20% ROI.

But that is when a company is being sold outright, 100% acquisition. The sellers only motivation is cash to completely walk away, the buyer provides no other incentive than cash to the seller.

Since IQST is likely to only acquire the majority interest 51% they have alot more value to offer the seller than just cash. IQST adds alot of value due it it's proven cross selling capabilities. That means the seller gets to keep 49% of the company and will benefit from the future growth he expects will happen by joining IQST. They have even stated they expect to double the potential acquisitions sales by 2027. So negotiations will involve discussing that value IQST brings while discussing what the acquisition company should be valued at and IQST will be able to buy at a significantly lower valuation than they could if they were acquiring 100% of the company.

Lynk Telecom as an example is supposed to add 1M per year, 51% to IQST would be 500k. They negotiated to only pay 1.5M so 3x annual profit which is well below the norm. IQST negotiated such a good deal because the seller knows his 49% of the business will grow significantly once it's part of IQST.

So if we use the same 3x annual profit, x 51% of the profit, and knowing IQST is looking at spending around 30M... They could acquire a company doing up to 20M annual profit. 20M x 51% = 10M profit to IQST. 3x profit = 30M valuation for 51%

I doubt they land that great of a deal and would expect more along the lines of a 5x valuation which would be a company doing around 12M annual profit. 51% being 6M × 5 = 30M cost.

IMO for them to pay much more than 5x what 51% of the company's profit is, it would have to be one hell of a good company already showing significant growth or adding tremendous value outside of just the financials or something else. But those are unknowns and this is just a discussion around general valuations on what we do know.

What are your thoughts Snow? I'm open to feedback if I'm missing something in my thought process.

Not financial advice, just a personal opinion.